An argument, here, with which we happily agree, except there's no discussion of the de-regulation of the homeowner, who, since 1997, has been able to forego taxes on up to $500,000 of gains on the sale of a principal residence every two years.
Smart couples plausibly have been able to milk this provision very profitably by flipping homes up to five times since then, until everything fell apart in 2008.
And don't forgot all those HELOCs whose capital was misallocated to financing automobile purchases, vacations, and other consumption not even remotely having to do with "home improvement."
The current housing debacle shows among other things, as Chris Whalen has suggested, how the entire post-war commitment to housing was a giant, civilizational misallocation of capital. More than anything, it was a failure of a sentimentality which developed in the wake of the de-moralization which forever destroyed the naivete of a nation. The de-regulation of the financial industry at the end of that road was only the logical conclusion of this process, its final outworking, not its cause.
