David Streitfeld of The New York Times is a terrific reporter (just ask Joe Klein). For several years now, he has done terrific work on the slow and painful collapse of the housing bubble. This piece, which leads the Times today, strikes me as good news—even though it is going to cause some heartache for folks trying to buy and sell in high-end neighborhoods.
For the last three years, federal agencies have backed new mortgages as large as $729,750 in desirable neighborhoods….
But now Democrats and Republicans agree that the taxpayer should no longer be responsible for homes valued well above the national average, and are about to turn a top slice of the housing market into a testing ground for whether the private mortgage market can once again go it alone. The result, analysts say, will be higher-cost loans and fewer potential buyers for more expensive homes.
As I’ve written several times recently, the place to start trimming the federal budget is in subsidies for people who don’t need them. And it stands to reason that someone who has enough money to buy a house worth north of $750,000 doesn’t need a federal handout. Conversely, someone who does need federal support to buy an expensive home probably shouldn’t be in one. That’s a sign of too much debt, and that’s what got us into this mess to begin with.