This one takes the cake.
The builders' lobby is ramping up its sales pitch for a $250 billion stimulus package called "Fix Housing First," arguing that financial markets won't recover until home prices stop falling. They are calling for a generous tax credit for home purchases and a federal subsidy that would lower a homeowner's mortgage rate.
..."The basic asset that is underlying all the financial problems that we're experiencing is highly unstable, and it's causing an ongoing hemorrhaging in the financial system," said David Ledford, who oversees housing finance and policy for the National Association of Homebuilders. "It's starting to snowball."
But what the homebuilders conveniently forget is the Bubble they've enjoyed for the last 10+ years. The price of housing increasd, and the main measure of housing prices (the income/price ratio) is now about 4-to-1, instead of the historical average of 3-to-1.
That's "Easy Al" Greenspan's fault--he pumped money into the system which caused the dotcom bubble/bust, and now the home price bubble/bust. The deficit-happy Bush Administration didn't help, of course--but monetary policy was just awful under Greenspan.
The homebuilders who over-extended, along with the Realtors, began to believe their own line of bull that "housing and land will never, never, never go down in price."
They were wrong, too.
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