By Daniel Duffield
The U.S. Housing recovery has not yet gained enough strength and stimulus is recommended through the reduction of government oversight of the mortgage financing system, said Robert Shiller, a professor at Yale University and co-creator of the S&P-Shiller index of property values.
While Shiller believes that the current market has made some improvement and taken a step in the right direction, he stated that this movement has not been strong enough to be stable and reliable. Despite the currently low mortgage rates, market restoration must grow stronger to gain more stability.
Figures revealed by the Commerce Department on October 24 conveyed that American home purchases in September illustrated the fastest rate in the past two years, demonstrating revitalization from the market decline and economic downturn. Sales reportedly rose 5.7%, reaching a 389,000 sales annual rate, the highest since April 2010 and increasing from August’s rate of 368,000.
According to Shiller, the government regulation the private sector mortgage market has been impeded. He believes that the U.S. needs to consider alternative mortgage solutions that do not carry the detrimental effects of the previous mortgage crisis that put 10 million homeowners underwater. “We don’t want to put Americans in such leveraged positions,” said Shiller.
Republicans in Congress have proposed the dissolving of Fannie Mae and Freddie Mac, the government-sponsored mortgage finance enterprises. Treasury Secretary Timothy F. Geithner stated that he intends to suggest a housing-finance renovation to achieve this end. Although this plan was supposedly planned for a Spring release, plans have yet to be released.
Shiller stated that with unemployment averaging 7.9%, the U.S. economy needs fiscal stimulus to produce jobs. American spending increases should be counterbalanced by higher taxes to wealthy citizens proposed by President Barack Obama to stop the expanding of national debt.
“It would be tax increases Obama set on the wealthy, and at the same time, expenditure increases -- that’s a balanced- budget stimulus,” Shiller stated. “It doesn’t raise the national debt, but it stimulates the economy. We need something like that.”
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