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From the WSJ’s What’s News section:

Home builder are ramping up speculative construction to attract last-minute buyers who want to tap a soon-to-expire tax credit [the purchase must be signed by April 30 and closed on by June 30].

Houses were being built with reckless abandon a few short years ago, and times were good then. Clearly, we need the relentless construction to resume. Never mind that 2009 was yet another record year for home foreclosure filings:

Almost 3 million homeowners received at least one foreclosure filing during 2009, setting a new record for the number of people falling behind on their mortgage payments.

RealtyTrac, the online marketer of foreclosed homes, reported that one in 45 households — or 2,824,674 properties nationwide — were in default last year. That’s 21% more than in 2008, and more than double 2007’s total.

The dramatic, sustained increase occurred despite efforts, such as President Obama’s Home Affordable Modification Program, to reduce foreclosure filings.

This will lead to the adjustments needed in the larger economy to purge malinvestment and direct resources to the most efficient uses possible. Government intervention into the market always has that effect, after all.

(Republished from The Audacious Epigone by permission of author or representative)
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  1. I have lots of arguments with people over the validity of my theory that the tax credit was nearly worthless to first-time home buyers since the existence of the tax credit would more or less prop up the cost of a home by the same amount. In other words, the net effect of the credit was large transfer payments to a) those who already own homes they wanted to sell and b) those who are in the business of selling homes. These groups are not ones that need a helping hand from the government. I agree that all of this malinvestment has to reverse itself sometime and I say better sooner than later.

  2. Jokah,

    You might find it amusing that Newsweek recently published a short opinion piece suggesting that the Fed and the Government should continue to prop up the housing market.

    It was written by the chief economist of the National Association of Realtors.

    Media fail…

  3. Jokah,

    That strikes me as a sensible theory. I wonder if there is an economist out there who might try to quantify it.

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