26 Aug 2008

House Prices: It’s Always Darkest Before Dawn?

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Housing prices have just set another record year-over-year decline: They fell 15.9 percent from June 2007 to June 2008.

Ah, but never fear! The monthly fall (from May to June) was only 0.5 percent, which is the lowest monthly drop since July 2007.

Because of this last fact, the headlines read, “House Prices Show Signs of Stabilizing,” “Housing: Is the Worst Over?” etc.

Is it just me, or has the financial press been telling us “We’ve finally hit bottom!” for about 8 months now?

In terms of policy recommendations, it’s simple: The government should stop leading people on with hopes of ever more generous taxpayer assistance to the housing sector. People can’t just cut their losses, slash prices and move on with their lives, if they think the government might announce yet another unprecedented bailout next month.

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