The housing market is the key to the economy ... nothing causes meaningful economic strength like houses being built and furnished ... the auto industry is dwarfed by the housing industries importance in driving economic expansion (GM and Chrysler had no idea of this simple fact) ... it is the ultimate item to be consumed. Land is driven by the population growth and is never consumed albeit it can be contaminated to the point beyond its own uselessness ... think Fukushima, Chernobyl and Prince William Sound ... more than useless ... an ongoing spreading danger/dead zone. Houses on the other hand depreciate, decline and drag their neighbourhood into devaluation.

If you can not revive a housing market with near zero rates for 4 years and a promise that will continue to be the case for at least 1 more year and the likely prospect of a sub 5% prime rate for years to come, you must face the reality that the North American housing market is dying if not dead. At very least it is on an extended sabatical (+20 years).

Demographics, both human (aging and expensive to maintain) and manufacturing (aged and closed) combined with the inability of government to raise funds (either through debt or taxation) to afford infrastructure in support of a massive program encouraging enormous immigration. Think of government debt and the influx of European immigrants in the early 1900's and how that changed North America.

Of course at that time, America was the land of opportunity, which became the land of milk and honey and recently has been slowly transforming (through a public policy of high taxes and the monetary policy of currency devaluation) to be like everywhere where rice and beans is the main course.

That reform is driven by the impacts of globalization. Globalization and free trade increase competitiveness and reduce the price of goods. More importantly it allows investment capital to more freely flow to places where the factors of production are priced at a highly competitive level.

You can do whatever you like, but all the kings soldiers and all the kings men can not put the American real estate market back together again and without that recovery willnot truly occur.

Possible reasons.

Home buyers are too smart.

There exists an overcapacity of dwelling space. North American house sizes dwarf the size of houses worldwide. If that isn't over capacity nothing is.

Banks don't want or can't afford the business?

Banks can only afford to lend to people who don't need loans. That is people who already own their own home and know better. Seems there is a limited customer base and they have resorted to new and riskier ways to satisfy investors demand for return.

Without demand the only thing that can drive up housing prices is significant inflation. The truth can not be told and Bernanke is pursuing the only policy that can help. He can not admit the need for significant inflation any more than Volcker could have said Americans are spending too much over heating the economy. The solution then was double taxes to reduce spending or use monetary policy of high interest rates until people volunteered to stop spending.

Nobody will say the emperor has no pants, that would suggest politics is dead and that WILL NEVER HAPPEN.

Critics of Volcker were plenty, Critics of Bernanke perhaps even greater ...

Inflation is the only ticket out and during a period of relatively free international trade where labour rates are low, worldwide innovation is high, and the relatively affluent (North American) are reducing consumption deflation is inevitable.

You can do whatever you like, but all the kings soldiers and all the kings men can not put it back together again.

Onservations and likely future trends

Giant overcapacity has killed the housing market

International trade will be stopped and barriers will return to force redevelopment of local manufacturers so inflation can do its job of stabilizing house prices. This solves balance sheet problems of banks and will serve to restablish consumer confidence whose main assets value is'worth more than what they upon it.

Real estate investment will continue to shift to physical asset investment until real estate asset returns will equal returns in physical asset investing.

The ongoing elimination of the world's most privileged people in history (North America's middle class will continue) through a completely necessary and surreptious policy of asset inflating through currency devaluation.

orgy