Nah, let’s not let the market learn from its mistakes

This NYT story is not happy news for those of us who have sat out the housing market b/c we refuse to pay too much money using risky loans for a home in an overpriced area of the country:

Elizabeth and Ben Kilgore are back in the real estate market. All it took was a little-publicized section of the economic stimulus package President Bush signed into law last week that lowered the borrowing cost of buying a more expensive home.

And if the limit on loans backed by a government-backed housing finance entity like Fannie Mae is raised from $417,000 to the full $729,750 she has been hearing about, Ms. Kilgore said, “we will be able to get a 30-year fixed mortgage for less than what we’re paying now plus our homeowner’s dues.”

Okay, do I get this right? The stimulus package is going to help our economy because it will allow people w/ 700k houses to obtain nice, normal mortgages.  Were they really the ones who needed our help?

700k, the article goes on to explain, is really just a number. It sounds outrageous to me and others who live in cheap-old southeast Florida, but the median price of a home in San Francisco, for example, is about 777k. So really, this change in jumbo loan backing is geared toward helping average people who live in the most exorbitantly priced places in the country.

No wait, I still don’t get it. It seems like those ordinary people would have been helped more by what the market is actually doing right now (unless it causes them to lose their jobs), which is falling in real terms. Housing prices in the SF bay area have fallen close to 20% in the last year, as they should when the market is flooded and has been overvalued. Hmmm, would I rather pay 777k or 650k for my house, let me see… They’ve started to fall here too, which could eventually help people like me… if it were allowed to continue. But it looks as though one of the package’s main goals is to prevent that from happening, favoring some of the very people who got us into this mess and some people who just plain don’t need help, people who could either afford very expensive homes in the first place and people who took on loans they couldn’t handle. Oh yeah, and only people who live on the coasts:

In areas where median prices do not exceed $271,050, such as the entire state of Alabama, the basic loan limit will be $271,050.

The economic stimulus package of 2008: some states left behind. Again, this seems to be exactly the kind of short-sighted, instant gratification-oriented thinking that got us (all of us, even those of us who tried to spend responsibly and not take on more mortgage than we could afford) into this situation. Either housing prices should fall and let waiting buyers back into the market, or they should rise naturally and encourage people to flow elsewhere. I know the jobs have to flow elsewhere first, and they would be more likely to do so if the there were not unnatural subsidies for being located in an expensive place to do business.

Oh well. I didn’t really want to own a home in Florida anyway, so at least this could help keep me motivated to move along.