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Sometimes it appears the U.S. government has all but given away houses to solve the intractable problems in the housing market. That is because the government has all but given away houses to shore up the segment of the economy where all the trouble began in the first place.
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One basic assumption, however, is that the problems would be best handled by letting the dynamics of commerce sort things out. In other words, water seeks its own level and so should the housing market. Prices are falling, because they need to fall, all things being equal.
According to this theory, prices will rise only when the job market is ready to support higher prices.
To pump some life into the morass the housing market has become, the federal government should create jobs. Buyers, sellers and lenders in a regulated market can figure out the rest, as they always have.
The reason this is possible is that banks actually do not like foreclosures. If they did, that would be another matter. Luckily, they don't.
Nevertheless, for all the efforts put into rescuing the housing market, prices have continued to slide. Moreover, home prices reveal the sincerity behind figures in the labor market.
Why is an unemployment rate dropping from 10.2 percent to 8.3 percent so unimpressive?
The answer: The falling unemployment rate has not been matched by a correlating rise in home prices.
The unemployment rate hit 10.2 percent in October 2009. At that point, the 20-city composite Home Price Case-Shiller Index was 146.49.
Since then, the unemployment rate has fallen by 1.9 percentage points. The 20-city Home Price Index, with what looks like improved demand, should have gone up. Instead, it has dropped. In the latest Case-Shiller report in December 2011, the index was at 136.71, off by almost 10 points.
A major reason the unemployment rate is going down is that people are leaving the labor market -- they are giving up -- not because they are finding jobs. The evidence is in the housing market.
What about that? Another campaign slogan bites the dust.
In international markets Friday, the Nikkei 225 index in Japan dropped 1.14 percent and the Shanghai composite index in China fell 1.1 percent. The Hang Seng index in Hong Kong shed 1.11 percent and the Sensex in India rose 0.96 percent.
The S&P/ASX 200 in Australia was flat, off 0.08 percent.
In midday trading in Europe, the FTSE 100 index in Britain slid 0.39 percent while the DAX 30 in Germany fell 0.41 percent. The CAC 40 in France lost 0.67 percent and the Stoxx Europe 600 lost 0.53 percent.
