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Housing "crisis" in question

Anthony Randazzo
July 27, 2008, 12:59pm

Bloomberg News posted numbers last Friday showing that 1 in every 171 American homes are in some stage of foreclosure. Totaled, it's over 260,000 homes. Those numbers sound like a lot until you realize it's just .58 percent of homes–meaning 99.42 percent of homes are presently in the clear. While those are real people, with real problems in the foreclosed homes, anything we're doing with that much success shouldn't be considered a "crisis". Such language is the media using hyperbole to gain viewers, and only inspires unnecessary fear that is leading to over reaction. Top 3 state levels of foreclosure (according to RealtyTrac.com) 2.08% - Nevada 1.47% - California 1.43% - Arizona (0.58% - National level) On the macro level, this is acceptable. Panic shouldn't set in when we're near perfection. Still, the human element must be considered. While we may not be in a crisis, things are still bad. Those foreclosures represent thousands of American families with ruined lives. When you look at the micro-level, and see specific communities, the situation is bleaker. Top 3 municipality levels of foreclosure (according to RealtyTrac.com) 4.00% - California Central Valley 3.13% - Riverside-San Bernardino, CA 2.86% - Las Vegas Several years ago, Thomas Sowell published A Conflict of Visions, dichotomizing "constrained" and "unconstrained" visions. People's view of the world falls on a line between the extremes of these two worldviews. For the rightist-libertarian, perfection in life is something "constrained". We assume life won't be perfect, we can't have perfect knowledge, and when the Invisible Hand guides the market it isn't always with a gentle nudge. Why should Vermont's federal tax dollars bailout mortgage lenders when their state has had only three houses presently in foreclosure? But not all people think this way. Many have an unconstrained, utopist view of society. People with this view believe in, at some level, the perfectibility of many societal aspects. They believe in the power of government to fix problems. They believe we can have perfection in the housing market. It should be little wonder that the crisis flags have gone up with housing dipping past half a percent. In reality, we can't sit at either extreme. Yes, there is no crisis and the problem is nowhere near as bad as it seems. But also, yes, real people are getting hurt in his downturn of the economy. We can't ignore that as a kneejerk reaction to the hyperbolized verbs pervasive in today's society. In the end, though, the more we panic, the more we'll over react–and the more problems we'll cause for ourselves.

Anthony Randazzo is Director of Economic Research


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