Political Impact on BusinessSmarter BusinessUncategorized

Congress Can’t Hurt Home Prices by Dumping Freddie, Fannie

Don’t any of our congress people get it?  Home prices can’t be hurt by the Government getting out of home loan guarantees.  Are they REALLY so ignorant that they believe this?  They have no thinking associated at all with free markets and yet they are in charge of the freedoms of our markets?  I could REALLY get angry about this one.  The only effect they have right now in maintaining inflated prices is to remove assets from the market since nobody wants to invest in artificially over-priced property.  If the government wants to guarantee a floor price on the property, then it becomes an issue of time; time value of money matters to smart investors!

First off, homes which cannot get loans have no market!  Second, the government has no business making a market, in any market.  Third, if they would let the real markets take care of it the homes would have value because then they could be traded, profitably, and at low risk.  That’s the whole point!  Risk avoidance and over-insurance caused the entire problem in the first place.  So one would ask, “what about the people who need homes?”

Yes, it’s true that some people might be homeless.  I don’t want that any more than they do themselves.  But this does bring up another good thing about American free markets that makes us so competitive with the rest of the world and a much better place to live than other countries.  When things are priced according to market valuations, there is more free cash for gifting and projects.  What that means is that money will find a way to make sure that everyone has a roof over their heads.  What did we do before Freddie and Fannie?  In this country people really don’t go hungry and without a place to sleep unless they want it to be that way.  Once in a while someone becomes new to the process of not owning a home or having the ability to rent.  The system finds them, because we have good people in the system, who want to help, and we have both the facilities and the money to make sure it all happens.  Guaranteeing them a loan is not the way to go.

Allow properties become valued at market price so they can be purchased and traded again.  This will increase the momentum of money and the properties will eventually go back up in price.  Proof of this is in taking a look at Houston and the rest of Texas, during the S&L collapse of the late 1980s and early 1990s, when home prices dropped dramatically.  They have since recovered nicely because free markets made the homes valuable again when they fell to reasonable prices that could be afforded.  Barney Frank and the rest of the gang in congress should be required to take classes in economics, so that they will know the potential impact of the laws they pass.