'Saving' the Housing Market

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by Thomas Sowell: Promises
and Riots



“Housing Market
Setback Forecast” the newspaper headline said. A recently released
report on housing says that home sales are down more than 25 percent
and the inventory of unsold homes is about 50 percent higher than
it was the same time last year.

This is
just one of innumerable stories about the woes of the housing market.
We all understand about human beings having woes. But how can a
housing market have either setbacks or woes? Moreover, why should
politicians be riding to the rescue of the housing market with the
taxpayers’ money?

We hear
all sorts of sad stories about people whose homes are “under water”
or who are facing foreclosure. But why should our attention be arbitrarily
focused on these particular people, rather than on the many other
people who would benefit from being able to buy those same houses,
if the prices came down? The government is artificially keeping
the prices up with subsidies and with pressures on lenders to accommodate
the current occupants.

Can we
not walk and chew gum at the same time? Is our attention span so
limited that we can only think about one set of people that the
media and the politicians have chosen to highlight?

Do other
people count for less just because the media don’t put their pictures
in the paper or on the TV screen? Or because politicians are ignoring

we are more concerned about some people because they are especially
deserving. But this cannot be said about those who borrowed money
to buy homes that they could not afford, or who borrowed against
the equity in their homes, and now find that what they owe is more
than the home is worth.

If anyone is
especially deserving, it is those who had the common sense to avoid
taking on bigger financial obligations than they could handle, but
who are now expected to pay as taxpayers for other people’s irresponsibility.

No doubt
some people who are facing foreclosures might have been able to
continue making their mortgage payments if they had not lost their
jobs. But since when were we all guaranteed never to lose our jobs?
People used to put money aside “for a rainy day.” But now people
who have spent like there are no rainy days are supposed to have
the taxpayers pay to give them an umbrella.

What about
the people who saved and put their money in a bank? Those who blithely
say that the banks ought to modify the mortgage terms to accommodate
people who are behind in making their monthly payments forget that,
however “rich” a bank may be, most of its money actually belongs
to vast numbers of depositors, most of whom are not rich.

Those depositors
deserve to get the best return on their money that supply and demand
can offer. Why should people who save be sacrificed for the benefit
of those who spent more than they could afford?

Why are
politicians so focused on one set of people, at the expense of other
people? Because “saving” one set of people increases the chances
of getting those people’s votes. Letting supply and demand determine
what happens in the housing market gets nobody’s votes.

If current
occupants are put out of their homes and the prices come down to
a level where others can afford to buy those homes, nobody will
give politicians credit — or, more to the point, their votes. Nor
should they.

particular people at the expense of other people — whether the others
are taxpayers, savers or prospective home buyers — produces votes.
It also produces dependency on government, which is good for politicians,
but bad for society.

That is
why politicians give what Adam Smith called “a most unnecessary
attention” to things that would sort themselves out better and faster
without heavy-handed government intervention.

Why do
the media fall in with this arbitrary focus on particular people
who are having trouble holding on to homes they cannot afford? Partly
because it makes a good story and partly because too many people
in the media simply go with the politicians’ talking points. That
is a lot easier than thinking.

But the
rest of us have no excuse for not thinking — or for letting ourselves
be stampeded by rhetoric about “saving” the housing market.

4, 2011

Sowell is a senior fellow at the Hoover Institution at Stanford
University. His Web site is www.tsowell.com.
To find out more about Thomas Sowell and read features by other
Creators Syndicate columnists and cartoonists, visit the Creators
Syndicate web page

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