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“Drift Lower” Is BEST-Case Scenario for Housing, Ritholtz Says

"An economy in which you have homeless people and empty homes doesn't make any sense and that's where we're heading," Nobel laureate Joseph Stiglitz told the Daily Ticker earlier this week.

With home prices continuing to fall in most of the country and sales volume off 13% last quarter compared to prior year, the housing problem, if not getting worse, is certainly still a major mess for America.

True, foreclosure filings dropped 35% last month - to the lowest level in four years - says RealyTrac, but that is in part due to a bottleneck of proceedings caused by the robo-signing induced moratorium.

"The data suggests home prices will continue to drift lower for a couple of years - maybe just go sideways for a decade," says FusionIQ CEO Barry Ritholtz, who predicts another jump in foreclosures unless and until the weak jobs market picks up.

In fact, there are so many delinquent homes and underwater homeowners the federal government is looking into renting their share of them in an attempt to stabilize home prices and ravaged neighborhoods. The Federal Housing Finance Agency says it is seeking input from investors on how to rent the 248,000 homes the owned by government-controlled mortgage firms Fannie Mae (FNMA) and Freddie Mac (FMCC) and the Federal Housing Administration.

Ritholtz is not convinced of the programs merits, based on the governments track record as landlords. "The federal government has subsidized and built low income housing and rented it," he says. "It hasn't been a successful program for them I hate to see them go down that same road."

Ritholtz has another idea: Attract new homeowners to the country. He suggests the government should reduce the anti-immigrations measures created after the 9/11 attacks and allow more skilled workers to immigrate into the country. "You want to get rid of excessive supply, the way to do it is to create demand," he says.

Make it easier for educated people to live the American dream and those homes will be filled, Ritholtz declares. "That to me makes much more sense than getting into the business of being landlords."