Zillow’s Humphries’ Advice to Congress on How to Fix Housing: “First Do No Harm”
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The housing market showed signs of improvement this week, but without question there's still a long road ahead before anyone can declare a full recovery. (See: Zillow's Humphries: "Encouraging News" on the "Long, Rocky" Road to a Housing Bottom)
Stan Humphries, chief economist for Zillow, an online real estate resource for homebuyers and sellers, does not believe housing prices have hit bottom yet and likely won't until 2012, at the earliest.
There are two big issues holding back a recovery, according to Humphries -- negative-equity and high unemployment. He estimates that nearly 30% of single-family mortgage holders were under water on their mortgage payment in the second quarter of this year.
On the eve of the much-awaited FOMC meeting Wednesday, Humphries testified before the Senate Subcommittee on Housing, Transportation and Community Development to give his best advice on how to fix the country's housing rut.
He made the following three points:
First, don't underestimate the market's ability to fix itself. This is, in fact, already happening. We may not like the timetable, but economic recovery can't always happen overnight.
Second, many policies addressing foreclosures are simply addressing symptoms, not fundamental drivers of a healthy housing market. Yes, declining values have led to foreclosures, which have created an excess supply of housing. But eliminating this excess supply can't easily be achieved via policy. However, policy can help the demand side, chiefly when it's targeted at decreasing unemployment.
Third, in trying to speed up the recovery of the housing market, the first priority of the government should be to do no harm. The federal homebuyer tax credits of 2009 and 2010, while they stimulated sales in the short term, did not materially change the trajectory of the housing market in the long term. In fact, it is arguable that they delayed the ultimate market bottom. In the future, legislators should be sure not to make similar mistakes, which are incredibly costly to taxpayers, but net very few positive long-term results.
Humphries joined The Daily Ticker's Aaron Task in the accompanying interview to discuss his perspective.
Do you agree that the housing market can fix itself, or does the government need to do more to fix the problem?
