Headlines from recent weeks about the U.S. and local housing market paint an unhappy picture:
* "Housing prices fall in 20 cities."
* "2011 set to be worst year for housing."
*"Area home sales drop in November."
For practically anyone who has tried to buy or sell a home the past few years -- or who has faced foreclosure -- these ugly tidings are scarcely "news."
It's all too obvious that sellers frequently cannot get a price close to what they want for their homes, in large part because they are competing with a glut of low-price foreclosed homes.
Many would-be buyers are reluctant to purchase a home for fear that the housing market has not yet "bottomed out," and that the value of any home they buy might continue to drop.
Most painfully of all, millions of Americans have lost their homes to foreclosure in recent years. And that does not include the 1 million homes that are expected to be foreclosed on in 2012 because a huge processing delay pushed back those foreclosures from 2011. Foreclosure not only destroys the investment that homeowners put in their houses, but it causes enormous heartache, stress and disruption for the owners and their families.
Yet the sad fact is, the U.S. housing market remains distressingly weak, years after its collapse, and prospects for rapid improvement seem dim.
Last year "will likely end up as the worst year for [new-home] sales in history," The Associated Press noted.
And The New York Times reported, "The latest housing report indicates that further declines are in store for the weak U.S. market, or at best a period of long, slow recovery."
In October alone, home prices dropped by more than 1 percent, and some analysts predict a drop of an additional 5 percent to 10 percent in 2012! That represents an enormous loss of wealth across the country.
Of course, the housing market is far from the only thing that drives U.S. prosperity. But it is an extremely important sector of the economy.
Depressed sales of new homes are highly troubling, because the construction of just one new home generates the equivalent of about three jobs for a year and approximately $90,000 in taxes over time, the National Association of Home Builders points out. So every new home not built in our weak economy means three jobs not created and a great deal of tax revenue that never gets generated to support government services.
So what do we do to boost the housing market?
Mainly we need to stop the federal meddling that helped wreck the market in the first place.
The federal government's insistence that banks give often too-large home loans to people who had poor credit was a major factor in the housing collapse. The government's assumption of the risk for those iffy loans through government-run Fannie Mae and Freddie Mac made things even worse. Fannie and Freddie have now been bailed out to the tune of more than $160 billion -- from taxpayers! And that amount may eventually exceed $200 billion!
Banks and borrowers should bear the risk of mortgages. The risk should not be placed on taxpayers. That principle should be obvious. And yet, Washington is going the other direction, by actually increasing the size of home loans it will guarantee -- to $730,000!
Instead of pulling back from the housing market where it has done so much harm, the federal government is expanding its intervention, setting up taxpayers for more losses.
Unfortunately, that is also setting up the housing market for continued weakness -- and undermining hopes for real economic recovery.