By Stacy Curtin in Recession, Politics

The midterm election is around the corner and the battle is heating up over whether Democrats or Republicans can better handle the economy. (See: The GOP’s ‘Pledge to America’: Do the Economics Add Up?)

 

Housing – along with jobs – is at the forefront of this debate. A number of housing recovery proposals have been floating around in recent weeks, including:

 

• The Administration’s initiative to simplify loan applications to make them easier to understand

• The GOP’s “pledge” to remove the government’s control of Fannie Mae and Freddie Mac

• Glenn Hubbard’s suggestion to allow refinancing of all homeowners stuck with underwater mortgages.

 

 

But can the government do more to fix the housing crisis? More importantly, should it?

 

Stan Humphries, Chief Economist at Zillow.com says, yes, there is more the government can do. But he doesn’t believe any more needs to be done and that more would just be wasteful.

 

“I think that the markets are in a process now where they just need to work through their internal dynamics themselves,” he says. “I do not think further subsidization – like the tax credit – is worthwhile.”

 

In that same vein, Humphries feels Hubbard’s proposal is not a prudent one. “Any proposal to wipe out negative equity that homeowner’s are currently in is fantastically expensive,” he says. (Editor’s note: Hubbard is scheduled to be a guest on Tech Ticker next week so will have ample opportunity for retort.)

 

Similarly, Humphries says the Republican Party’s “pledge” to end the government’s control of Fannie Mae and Freddie Mac is unrealistic — and economically risky if mishandled. “Anything that is jarring to the housing market right now is now what we need,” he says, noting 95% of mortgages in this country are backed by Fannie, Freddie and the FHA.

 

In the long-term, the housing market with have to be retooled to function on its own without the government’s guarantee, he says. But any action should be slowly and thoroughly considered.

 

Bottom Line: Humphries believes the worst is behind the housing market and the ongoing “bottoming process” just needs more time to work itself out. (See: Zillow’s Humphries: Housing Still in “Bottoming Process” But Worst Is Over)

 

Source: Yahoo