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A comment on Uncomfortable answers to questions on Economy. Parent comment

Re:Uncomfortable answers to questions on Economy by nostrademons on Thursday July 24, 2008 @05:46PM (#255895)
Anchoring. It takes time for people's expectations to adjust to a new reality. Folks are still saying "Well, if I can't sell for $400K [or $1M in my neck of the woods], I'll just take my house off the market and wait for the market to turn around." This'll continue until they realize that they're paying more in taxes and mortgage payments than their house is likely to appreciate in the forseeable future.

A good leading indicator for home prices is home inventories, which are still at record levels (though they've seem to have stabilized for now). The inventory report is a measure of how many homes are nominally on the market but aren't selling because the price is too high - the price has to adjust downwards until inventories reach normal, frictional levels.

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Re:Uncomfortable answers to questions on Economy by curiousgeorge on Friday July 25, 2008 @02:14AM (#256358)
The mortgage bailout is an effort to keep people in houses, even if they can't afford them. It keeps homes from going back on the market where competition would further lower the price level.

The Bush attempts to buy stock directly in the two Fannies are almost equally embarrassing, being a bailout of shareholders that in no way affects the viability of the business, which is guaranteed by the government anyway. Let them all go broke.

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