"New" Economics for Housing?
I am not an economist, but after reading comments from Celia Chen, director of housing economics at Moody’s Economy.com, in National Mortgage News this week, I am convinced that there must be some “new” economics behind such predictions of a big decline in real estate.
Like the “new” math that was introduced in American grade schools in the 1960’s, this type of “new” economics appears to be lost in the abstract. Ms. Chen says housing will be “a drag on the economy” the next two years. Since when did 7.7 million homes sales – the third highest level on record – become a drag on anything? Even a quick look at NAR’s research shows that the market is stabilizing, and it is expected it to improve in 2007.
With this "new" approach, I am sure we could come up with all kinds of ways to make transaction itself easier. How about anyone with the number seven anywhere in their credit score qualifies for a mortgage? Or, why not just go with income when determining the amount one can afford – forget that pesky debt altogether?
Don’t get me wrong, Ms. Chen certainly is entitled to her way of doing things. I just hope the Fed sticks with tried and true economics and keeps interest rates low enough for us to experience what is most certainly a soft landing for housing.
