Demolishing new homeson May 1, 2009 at 8:51 am
Via Calculated Risk:
Some of the blame on this can be placed on Secretary of the Treasury Tim Geithner. Geithner, who wants to protect banks from risk more than he wishes to protect our free-market system from political favoritism, has provided zombie banks with the capital to keep operating without requiring that they price their assets at market rates. This has allowed a large stock of hypotically priced assets to accumulate, which of course have no buyers.
In a rational market, goods decrease in price until a buyer can be found. However, Geithner has so broken the supply-and-demand system of housing that instead of having a functioning real estate market (at, say 70% off market prices), we have an artificially chilly housing market at hyponetically exagerated prices.