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Market Forces and Recovery


Doug French provides some great commentary on housing market in “Markets Stagnate Until They Clear.”

I don't know why so many economists and pundits look to return of boom prices and volume as sign of "recovery" in the housing market and necessary for recovery of the economy. What part of an artificial boom accompanied by malinvestment is not understood? Highlight is from the opening paragraph.

Opening paragraph:

What the home and mortgage market needs — and it will not recover until then — is a rebooting to current values. To do that, principal amounts must be reset. They need to be reset not by government force, but by letting the market work. Let bankrupt mortgage holders fail.

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