Falling Home Prices Are Bad for America

FALSE! The current market is artificial. Prices have been propped up for years, which means there is now a serious disconnect between house prices and fundamentals. In other words, home prices are too high and NEED to come down.

Regardless of what everyone is saying, there are millions of renters and potential homebuyers who would benefit from lower, more reasonable home prices. Current homeowners--not speculators who signed self-destructive mortgage agreements, but actual homeowners--would benefit as well.

When prices are low, everyone gets to pay less in taxes and less for their next house. Furthermore, it is easier to sell your house when it is affordably priced.

People Can Afford Current Home Prices

FALSE. If people could afford current home prices on current incomes, the word crisis wouldn't be used in conjunction with the housing market. Prices have become so high that most of the households earning the median household income for their area cannot legitimately afford to buy a median priced home where they live and work.

The reason is because incomes are stagnant. In the last decade median wages for workers have increased a mere ten percent. National median home prices, on the other hand, have increased by more than 45 percent (when adjusted for inflation.)

Because the cost of buying has more than doubled in the last ten years, there is now a huge gap between rents and house prices. There is no chance of rents and incomes increasing at a rapid pace in the near future, which means home prices MUST fall before the nation's affordability crisis can be solved.

A Mortgage Bailout Will Help to Prop Up Home Prices

TRUE. But despite what bailout-wielding politicians want you to think, this is not a good thing. Artificially propped up prices are good for no one. Compare it to the choice of ripping a Band-Aid off bit by bit or all at once. Either way there is pain.

Propping up prices will delay the inevitable correction, but it will not stop it. In fact, it will make it worse. Most of the proposed bailouts (example: Bush's Teaser Freezer) keep unqualified consumers in unaffordable homes. What is exactly does this do but create an artificial environment ripe with unfairness and inflation?

Taxpayers Aren't Funding the Bailouts

FALSE. Taxpayers will inevitably fund all of the mortgage bailouts that have been proposed. If you disagree with this and believe politicians who tell you otherwise, the time has come to step away from the Kool-Aid.

Let's look at a few examples:

• State Government Bailouts: Over $1 billion has been pledged by various states to help people refinance out of current mortgage loans. State funds should never be used to benefit and reward lenders and borrowers who greedily dabbled in risky loans. This money should be used for things that do not penalize responsible homeowners and renters.
• FHA Secure: The Bush Administration wants to bail people out using a taxpayer-guaranteed loan program. What people don't realize is that the FHA will be operating in the red this year because of their own irresponsibility and lax lending standards. Cash infusions from the government (i.e. taxpayers) will be necessary to keep the organization afloat. Allowing the FHA to guarantee even more loans will put taxpayers on the hook for millions more.
• Freddie Mae and Fannie Mac Expansion: Policymakers are pushing for even less regulation for Fannie Mae and Freddie Mac so that the two companies can buy and make more loans. The catch is that these two companies are not fully privatized. If they fail--and without reform, there is a good chance that they will--taxpayers will be the ones left flipping the bill.
• Federal Bailout Funds: Several presidential candidates, including Hillary Clinton and Barack Obama, want to create a taxpayer financed 'federal fund' to help struggling homeowners. The plans vary in scope, but all will cost taxpayers BILLIONS of dollars.