The cure for real estate

Here's how to fix the real estate malaise, plain and simple.

What is the real estate malaise? The problem is twofold.

1. Prices are (still) too high. Even after the downdraft of recent years, many people can't afford a new home or used home, especially because, after the self-destruction of the banking system, banks -- still burdened with a multi-year backlog of foreclosures -- don't really want to write new loans.

2. Even so, and more significantly, there's a vast over-supply, an overhang that some have estimated will take another 10 years to work through.

For all the negative things that have been said about housing of late, we should remember, it was there for us at a critical time, about a decade ago. In the post-2000 economy, after the great tech boom and bust, the economy needed something to get things moving again.

With the help of the Fed, the lenders, and people's natural acquisitiveness, up sprang a huge boom in housing. It didn't just help homebuilders. People used home-equity credit to buy more efficient vehicles (well, some did), improve their house, start a new business.

The solution?

The president and congress need to declare a moratorium on new home construction. Six months... a year? More if necessary.

If we want to go farther, we can do what some cities are doing, such as Detroit -- recapturing whole tracts of land by plowing under unoccupied slums and crime-ridden tenements and turning them into parks, trees, you name it.

"Plowing under"? That's a phrase from the New Deal... the Franklin Roosevelt solution to the dust-bowl agriculture depression. It was roundly derided at the time, but FDR has emerged as a well-regarded president.

In a world of supply and demand, you have to deal with one of two factors. The present housing malaise is one of oversupply; the remedy is to limit and reduce it.

In short, we could do worse than to do for housing what FDR did for pork bellies. 

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