Helping the Poor?

The most recent housing price index shows that it is the lower value homes that have suffered the most from the housing bubble:

For 16 major regional areas, S.& P. publishes separate indexes for the top, middle and bottom thirds of homes in the area, as measured by price. Those figures show that from the beginning of the decade through each area’s peak, prices of lower-value homes rose faster than either of the other groups in each of the markets except one, Denver, where the rises were virtually identical for all groups.

As a result, the pain of lower prices is being felt most strongly by homeowners who are most vulnerable, both because they may have taken out mortgages whose interest rates rose after initial teaser periods ended and because those owners are more likely to be facing prolonged unemployment.

While mortgage interest rates are low now, underwriting standards are tougher than they were during the bubble, and would-be buyers of lower-priced homes are likely to face more difficulty in getting mortgages than prospective purchasers of more expensive homes.

When you add to this the fact that at least part of the reason for the housing bubble was government subsidization of low-income housing through Fannie Mae, etc., you begin to realize that this is a good example of how government attempts to help the poor often backfire, and actually make the poor worse off than before.