The ailing US housing market passed a grim milestone in the first quarter of this year, posting a further deterioration that means the fall in house prices is now greater than that suffered during the Great Depression.
The brief recovery in prices in 2009, spurred by government aid to first-time buyers, has now been entirely snuffed out, and the average American home now costs 33 per cent less than it did at the peak of the housing bubble in 2007. The peak-to-trough fall in house prices in the 1930s Depression was 31 per cent – and prices took 19 years to recover after that downturn.
If the market says prices need to fall, they are going to fall. The government can prop them up only temporarily, and even that only at huge expense. Some day we ought to learn this lesson.
POSTSCRIPT: Not only did the government spend a fortune (that it didn’t have) on the program and fail to prop up prices, even the recipients of the tax credit are worse off. There is no aspect of this program that wasn’t an utter failure. Even cash-for-clunkers wasn’t this bad.