The reason that people can't afford to make real (that is: in the neighborhood of 20%) down payments is because, and I've said this many times before, home prices are too high - not because home prices need more stimulus/support/propping up.And as Karl Denninger notes:
In point of fact the government should encourage prices to contract to affordable and stable levels, from which they should not vary materially on a forward basis. This then turns homes into a place to live, instead of a speculative asset class.
Bill Gross says that the "cost" of a private system could be 300 basis points over Treasuries. So what?
He says this makes housing "unaffordable." My retort is at what price?
Notice what's not being talked about here: actually deflating the bubble, and returning homes to a price where Americans can actually afford them."The orthodoxy on housing is, along with drug policy, one of the more irrational policies that seems to have almost impenetrable inertia. Where is the common sense?