Housing recovery: The last act

August 27, 2009

I was discussing yesterday just what will happen to the bottoming out of the housing market after all the tax credits, foreclosure mitigation programs, and rock-bottom mortgage rates end.

I argued the small rush of newcomers seduced by a bottom, and the improving economy (and therefore more relaxed lending) might be enough to hold sales and prices steady.

But then I found out about the administration’s plan to use 4.2 billion of stimulus funds to buy foreclosed homes and turn them into federal subsidized housing.  By my quick calculation that’s about 40,000 houses at $100,000 each, which is about 6% of current inventory, a big enough share to support the market.

Seems like a perfect plan to me: Ensure sustained recovery, put foreclosed homes to use before they fall in disrepair, help people who did the worse through the crisis, and expand a helpful government program on the cheap.

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