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"Urban economists understand housing prices with a spatial equilibrium approach that assumes people must be indifferent across locations. Since the spatial no arbitrage condition is inherently imprecise, other economists have turned to different no arbitrage conditions, such as the prediction that individuals must be indifferent between owning and renting. This paper argues the predictions from these non-spatial, financial no arbitrage conditions are also quite imprecise. Owned homes are extremely different from rental units and owners are quite different from renters. The unobserved costs of home owning such as maintenance are also quite large. Furthermore, risk aversion and the high volatility of housing pries compromise short-term attempts to arbitrage by delaying home buying. We conclude that housing cannot be understood with a narrowly financial approach that ignores space any more than it can be understood with a narrowly spatial approach that ignores asset markets"--National Bureau of Economic Research web site

Intro -- HOUSING MARKET POLICY OPTIONS -- HOUSING MARKET POLICY OPTIONS -- CONTENTS -- Preface -- Chapter 1 Ramifications of Housing Market Policy Options -- Summary -- Introduction -- The Size of the Housing Problem -- Principal Reduction -- Risks of Principal Reduction -- Potential Impact of Principal Reduction -- Housing Market -- Consumer Spending -- Financial Sector -- Current Principal Reduction Policies -- Non-GSE Loans: The Home Affordable Modification Program's Principal Reduction Alternative and the 2012 Mortgage Settlement -- Fannie and Freddie's Position on Principal Reduction -- Legislative Proposals for Principal Reduction -- Large-Scale Refinancing -- Barriers to Refinance -- Potential Impact of Large-Scale Refinancing -- Housing Market -- Consumer Spending -- Financial Sector -- The Home Affordable Refinance Program -- Presidential and Legislative Proposals for Refinancing -- Renting Foreclosed Homes -- Barriers to Renting -- Potential Impact of Rental Program -- Housing Market -- Financial Sector -- Consumer Spending -- FHFA Pilot Program -- Legislative Proposals for Renting REO -- End Notes -- Chapter 2 The U.S. Housing Market: Current Conditions and Policy Considerations -- INTRODUCTION -- HOUSING MARKET CONDITIONS -- House Prices and Implications for Household Wealth -- Mortgage Credit Conditions -- Addressing Foreclosed Properties: REO to Rental -- Background -- Characteristics of REO Properties -- REO to Rental Program Design -- The Role of Banks -- Land Banks: An Option for Low-Value Properties -- Credit Access and Pricing -- Addressing Homeowners at Risk of Default or Foreclosure -- Obstacles to Refinancing -- Loan Modifications and the HAMP Program -- Loan Modifications with Principal Reduction -- Alternatives to Foreclosure -- Mortgage Servicing: Improving Accountability and Aligning Incentives -- CONCLUSION

What hope is there of a recovery in the housing market in the rest of 1993? Jonathan Morris, of economic consultant Lombard Street Research, analyses the influences that will affect the housing market.

The article discusses the anomaly of the housing market in the U.S. where hundreds of thousands of houses in the U.S. are still vacant but there are also hundreds of thousands of homeless people. It states that reviving the housing market is difficult because of the bad financial shape of the banks and the securitization model is broken and is not to be replaced anytime soon. It adds that the U.S. government of President Barack Obama is reluctant to face these difficulties.

According to economic theory, there are no strong reasons to tax (or to subsidise) residential moves, although low levels of taxation may be potentially justified to deal with the presence of externalities and economic stability. This is in contrast to practise in most countries where governments have created strong barriers to moving (transaction taxes, rent control) which induces substantial transaction costs. Likely, the welfare losses due to these government-induced transaction costs are substantial.

According to economic theory, there are no strong reasons to tax (or to subsidise) residential moves, although low levels of taxation may be potentially justified to deal with the presence of externalities and economic stability. This is in contrast to practise in most countries where governments have created strong barriers to moving (transaction taxes, rent control) which induces substantial transaction costs. Likely, the welfare losses due to these government-induced transaction costs are substantial.