So consider the current ecnomic conditions in the United States as a very bad problem short term in the credit markets essentially seizing and a long term issue not covered yet. Considering that housing is more of a factor then most economists give it credit for, as it is the American Dream to own your own house, the current economic situation in the United States has a long term issue in getting the consumers that left homes back into homes. Not all consumers that lost their house deserve to get back into a house but the credit worthy ones that lost their house, the government after bailing out the business sector needs to address the consumer sector in order to have a timely and orderly recovery in the housing market and credit market.

The mortgage market brings long term stability to the lenders in that default rates at a low level can be easily absorded and are money makers at times for them but in this level, due to the amount of houses in and through foreclosure, banks are having a harder time loosening themselves from the non-liquid assets leading to decreased liquidity. The bail out plan relieves this problem but the long term issue needs to be addressed also.

This problem is very akin to the one is the 80's that Norway, Sweden and Finland went through. The plan was similar and what happened was similar but it took those nations 7-10 years to regain the past economic strength because they did not address the long term issue in losing the inventory in the housing market. This led to lowered prices, lost equity and a depressed market for an extended period.

While the loses in the markets were nominal and not real loses, it still leads to an increase in inventory in the housing market and the length of time that inventory takes to work out is the length of time that this issue will last. The idea that should maybe be purported is in someone relieving the credit reports of the consumers or noting on the credit reports the issue that lead to the foreclosure. Those that got into arms, option arms, pick your pay and so on and so forth in the situation that the payments inceased to such a level that it was no longer realistic that they could pay for their housing should be able to and helped to get back into a home after a period of time with proper counseling in order to get the inventory out of the market.

Even though there is not high inventory in the new housing market, there is a glut of inventory in the existing homes and they are dragging down the prices of new housing causing the issue across the economy. This is the infection that leads to cross problems in markets. Not only does the toxic waste in the capital markets need to be worked out but also the inventory in the housing markets need to be worked out.

Right now in the market it is a buyers market but buyers are not buying because they both cannot get the mortgage loan to get a house and a section of the market does not have the credit score to get a home. It is a two fold issue in the housing market that will not work its way out until something happens to help it along and the elongated issue in recession will continue until those things are worked out. Creative destruction happened in the market and now we need creative solutions to restabilize and grow the markets. So far that has happened in the credit markets but it also needs to happend in the consumer market and just giving economic stimulii does not relieve this issue.

 

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