Home Sales, Home Values Decline
The Economic and Statistics Administration, a division of the United States Department of Commerce, reported last week that new home sales fell to their lowest level on record in the month of February.
We know that this is bad news for homeowners, builders, Wall Street and for the nation in general. The 
prolonged housing market slump and the ongoing foreclosure crisis benefits only a select few fortunate enough to take advantage of unheard of real estate deals.
The latest batch of sour reports leaves an equal number of laymen and experts wondering what else can be done? The Fed has held interest rates at or near zero for well over a year. According to Anthony Sanders, a Mercatus Center scholar and real estate finance professor at George Mason University, "the housing market stands at this point where we're in a rut that has been decades in the making."
Sanders argues that the housing sector is caught in a perilous Catch-22 where the Fed can't take further action, yet it can't pull back on measures it has already instilled, out of a fear of further collapse. He says, "The Fed has reached a tipping point where its actions are not really affecting much anymore...But without quantitative easing, interest rates would jump. Although there would finally be certainty without government intervention, the market would be hit extremely hard."
With home values expected to slide another four to five percent this year, higher down payments required and credit becoming as rare as steak tartar, Dr. Sanders warned of a trend that may ultimately prove more damaging than any action or inaction from the government.
"Interest in housing has waned incredibly. Home ownership used to be considered a rock solid investment. Consumers are dropping out because of concern and add the news about oil and food prices. When you throw all those things together, you have a stew that does not appeal to homeowners," he said.
In effect, Dr. Sanders believes that Fed policy has instituted a dependence upon government intervention in the housing market that may be nearly impossible to shirk, especially if private sector disinterest continues to generate a vicious cycle.
Clearly it's time for some out of the box thinking from policymakers. I'm just wondering if housing industry insiders recognize how small the box really is.
What do you think should be done to reverse the slide in the nation's housing market?
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Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!. She blogs about money and real estate at ThinkGlink.com and The Equifax Personal Finance Blog, and is Chief Content Strategist at RealtyJoin.com, a community for real estate investors.
