New reports that housing prices continue to drop are additional evidence that the housing market continues to languish in a depressionary state. While prices are inching up in some markets on a month-over-month basis, the average home still takes about nine months to sell or rent, and annual sales are well below the levels necessary to revive this sector of the economy.
Interestingly, housing industry supporters still point to federal tax credits for homebuyers, FHA and VA low-downpayment programs, and other stimulus programs as having (or having had) a positive impact on the housing market. This view is a bit odd because these programs, like Cash for Clunkers, do little more than rearrange the deck chairs on a sinking ship. They advance home sales but don’t create new demand, so the effects are economically unsustainable.
The housing market is experiencing a massive readjustment as supply and demand come back into realignment, and this will take many more years to sort out. Of course, a stronger economy where jobs and income are growing would speed up this process, but that’s a much bigger problem than the housing market and construction industry.
— Samuel R. Staley is Robert W. Galvin fellow and director of urban & land use policy at the Reason Foundation.