Wow- these guys actually get it-
The collapse of the housing market last month following several months of increasing sales ad prices should be no surprise, says a new report by Beacon Economics of San Francisco.
“Realistically they were going to fall, as it has been policy, not fundamentals, that has driven the bounce in the real estate market — a telling analogy for the force behind the U.S. economy overall,” says the report.
The economists say tax breaks and loan modification programs have at best a finite life and won’t solve the big problem, which they see as the ongoing tsunami of foreclosures – and worse.
“Today, the problem is that an enormous number of homes are underwater — the mortgage value is greater than the value of the home. Modifying loan payments will not solve this problem,” says the Beacon report.
They are gloomy about prices rebounding, especially in states like California.
“Home prices fell because they had reached unsustainably high levels during the course of the bubble. They will not reach these levels again under normal circumstances (normal inflation rates) for many, many years. Indeed, in many markets prices have not even returned to 2000 levels relative to incomes — a time when prices seemed close to their long-run sustainable levels,” the report says.
