The Government’s Housing Subsidies Are Screwing Families And Homeowners, Says Peter Schiff

It is hard to read, watch or listen to the news as it seems to be the same old items rehashed.  My own personal econimist, Mr. Havins, says it best when he tells the  market is a very perfect place once everyone in government gets out of it and lets it find its equalibrium.  Come on people wake up and get mad about this before it is too late to do something. – Sean

Most pundits argue that the government needs to stem the tide of foreclosures–to avoid a flood of houses hitting the market all at once and, thereby crushing house prices. The government needs to do everything it can to stimulate the housing market, these folks say, or the renewed decline of the housing market will take the economy down with it.

Peter Schiff, president and chief global strategist of Euro Pacific Capital, disagrees.

Schiff believes that the government should exit the housing market completely and let prices fall to a natural level. In other words, says Schiff, the government should stop subsidizing mortgage rates with quantitative easing, stop using taxpayer-funded losses at Fannie Mae and Freddie Mac to lubricate the mortgage market, and stop enacting things like the homebuyer tax credit to encourage people to buy houses.

But won’t this wallop the housing market? Won’t this cause many homeowners to go even deeper “underwater” and thus become more likely to just walk away. Won’t this lead to even more foreclosures?Yes, says Schiff. And that’s the point. This country needs more foreclosures, not fewer. We need to clear the market of “shadow inventory” consisting of houses owned by people who never should have bought them in the first place and return to fair pricing.

Artificially pumping buying online up house prices is not doing underwater homeowners any favors, Peter Schiff says. The problem is that, thanks to the crazy mortgages of the bubble years, today’s homeowners were often able to buy houses they can’t afford. And now these houses are millstones around their owners’ necks.Keeping house prices artificially high is also hurting new homebuyers, Schiff points out — by making it more expensive to buy (and forcing people to borrow more money to do it). In many cases, this punishes responsible people who have been saving up money to buy a house and rewards those who spent beyond their means.

Lastly, Schiff says, we need to do away with the cult of homeownership that has taken over the country in recent decades. There’s nothing wrong with renting, Schiff says. In most cases it’s far cheaper than owning. Until recently, Schiff observes, he was a renter himself.

(By the way, if you’re thinking about walking away from your mortgage, here are some things to consider)

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