Financing Woes

There has been plenty of discussion about what's wrong with the real estate market. We've been through a few years where the focus was on what was wrong with the banks, and the government put in a lot of money to make sure that the problem got fixed. Somehow, the banks are now rolling along with big profits. It would be too much to say, however, that they are rolling along just as they did before. There are numerous new rules and regulations, intended to prevent the same thing that happened before from happening again. This time, though, it is the same taxpayers who paid the bill for the last fiasco who are being harmed. The banks are passing the consequences of those new rules along to the consumers. I'm not saying that this is necessarily wrong, but what's happening is that real estate is suffering, perhaps disproportionately, for what went on with the banks in 2008 and 2009. Where before people could, and did, finance 97% of the purchase price of a home (yes, that was the median financing amount in the boom years), now they have to put down 20% in many cases. So, of course, real estate sales have slowed.

The answer is not that we should all go back to financing the whole cost of a real estate purchase. However, our economy will clearly not recover until people have jobs and until real estate, which represents the biggest asset class most people own, bounces back to normal. Not where it was before, but to normal--that's all we're asking. In order for that to happen, we cannot spend all of our time trying to fix the last problem, and we may have to put in some money and effort to boost sales through this period. It's not enough for banks to make money again. The whole system is bogged down, and it has to be jump-started. Now.