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Zuckerman: Government Should Leave Housing Market Alone

By    |   Tuesday, 21 Sep 2010 10:13 AM

The government has tried all manners of methods to support the sagging housing market, from bailing out Fannie Mae and Freddie Mac to subsidizing modification of troubled mortgages.

Real-estate mogul Mortimer Zuckerman, who now owns U.S. News & World Report, says we’d be better off doing nothing.

“There is no painless, quick fix for this catastrophe,” he writes in The Wall Street Journal.

“The more the government tries to paper over the housing crisis and prevent housing from seeking its own equilibrium value in real terms, the longer it will take to find out what is true market pricing and then be able to grow from there.”

The mortgage modification program simply hasn’t worked, Zuckerman says.

“It's been reported that half of the borrowers have been re-defaulting within 12 months, even after monthly payments were cut by as much as 50 percent.”

And new foreclosures will add even more supply to the current glut of homes on the market.

That means lower home prices and destruction of wealth, Zuckerman says.

“Every further 1 percent decline in home prices today lowers household wealth by approximately $170 billion, according to Goldman Sachs.”

Yale housing expert Robert Shiller said in a recent news conference that the policy responses of the Bush and Obama administrations basically have been “patches and bailouts,” the Journal reports.

He suggests new strategies such as indexing mortgages to inflation and making “preplanned workouts” part of new mortgages.

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The government has tried all manners of methods to support the sagging housing market, from bailing out Fannie Mae and Freddie Mac to subsidizing modification of troubled mortgages. Real-estate mogul Mortimer Zuckerman, who now owns U.S. News World Report, says we d be...
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2010-13-21
Tuesday, 21 Sep 2010 10:13 AM
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