N.Y. Times Admits Recession Not Over; Proposes Hilarious Solutions
Los Tiempos de Nueva York today gives front-page coverage to the Trulia poll you read about last week in Reason.
David Streitfeld, a former L.A. Times hand and probably the best person either Times has had on the California real estate correction, gives the lowdown:
Trulia and another real estate site, RealtyTrac, commissioned Harris Interactive to take a poll last November about when people thought the market would recover. A third of the respondents chose 2014 or later. But in a new poll, released this month, the percentage giving that answer rose to 54 percent.
The sharp decline in prices since 2006 has meant a lost decade for many owners. But what may prove even more discouraging to potential buyers is academic research showing that the financial rewards of ownership were uncertain even before the crash.
At some point we're going to need a moratorium on the phrase "lost decade." Asking prices in major markets remain well above where they were ten years ago, in 2001. I have been chronicling the failure to deflate asking prices in my own neck of the woods, and a few minutes with Zillow will almost certainly reveal that prices in your area are above where they were a decade ago. What has dropped back to where it was more than ten years ago is the percentage of Americans who nominally own their homes. Streitfeld notes how the rate of homeownership has been dropping:
Even as the economy began to fitfully recover in the last year, the percentage of homeowners dropped sharply, to 66.4 percent, from a peak of 69.2 percent in 2004. The ownership rate is now back to the level of 1998, and some housing experts say it could decline to the level of the 1980s or even earlier.
While this decline in nominal homeownership is important, it masks the much longer-term decline in real homeownership. The equity portion of homeownership (i.e., the part that is owned by you rather than the bank) has been in slow decline since at least the 1950s, and freefall since the 1980s. One of the positive effects of the recession has been to make saving and value creation popular ideas again – popular, that is, everywhere outside the government and the destination media. The Times editorial board piggybacks on Streitfeld's story with a call for more of the same fiscal policy that got us where we are today:
Unfortunately, no one in Washington is pushing policies to promote stronger growth now.
The sinkholes in the economy should be obvious. Most prominently, the housing market is still awful, and state and local government budgets are still a mess. Conditions apparently have to get worse before deficit-obsessed policy makers will be ready to address them, including with bolstered foreclosure relief and more fiscal aid to states. More delay would only imperil the recovery, such as it is. And without a strong recovery, it will be even harder to repair the budget. Continued hard times means low tax revenues and high safety-net spending.
If Washington won't do what is needed to make things better, there are still things that can be done to try to keep the economy from getting worse.
The administration could work to ease the rules for refinancing mortgages owned by Fannie Mae and Freddie Mac, the government-run mortgage giants.
Wow, there's really nobody in D.C. supporting "stronger growth now"? There wasn't a $700 billion bank bailout, or an $800 billion stimulus? There weren't trillion-dollar rounds of quantitative easing? I welcome the adolescent bitterness and self-dramatization in the ed board's "such as it is," with its implicit recognition that there is in fact no recovery. But they could at least have the honesty to admit that the recovery has failed to happen under exactly the policy prescriptions the ed board is saying we need.
To take just the ed board's last example, having Fannie and Freddie back more monstrously inflated mortgages with taxpayer dollars is not just the stated policy of members of Congress. It has been pursued with a zeal that would be prosecuted as fraud if it occurred in the private sector.
In a way, it's reassuring to know that America's newspaper of record is so clearly out of ideas. Institutional vapidity and ignorance is rarely so clearly displayed – and this time it's not about some matter of foreign affairs or political speech but a topic with which every person in the country has had five years of hard experience. Now it's just a matter of time before the editorialists find that the way they lied and all the corny tricks they tried will not forestall the rising tide of Hungry Freaks, Daddy.
