Creating that recovery, of course, is the rub. The low interest rates that helped boost housing and the U.S. economy after the early-2000s recession (and eventually created the bubble that caused the Great Recession) have been ineffective this time around. "If you look back at, say, for example, recoveries that were more robust—following the recessions in the mid-1970s, the early 1980s—those were recoveries that were a lot more responsive to monetary ease," says Conrad DeQuadros, senior economist at RDQ Economics. When the housing market recovered after the 1980s recession, he says, that spurred a "very significant pickup in job growth."
With the federal funds rate at near-zero for nearly three years now, not to mention historically low mortgage rates, the Federal Reserve has been scrambling to find ways to fix the economy from the monetary side, providing monetary easing and altering its balance sheet. However, such policy is proving ineffective. "[A monetary fix is] not going to happen this time," says DeQuadros. "It's not the level of mortgage rates—that's not what's holding back housing market. It's the excess supply of homes, the backlog of foreclosures. Those aren't issues that can be addressed with monetary policy."
This leaves the president and lawmakers to fix the problem. The president took a step in the direction of helping the housing market earlier this week, announcing a revamp of the Home Affordable Refinance Program as part of "We Can't Wait." HARP will now be open to a larger number of severely troubled borrowers who owe more on their homes than those homes are worth. But the program's potential effectiveness remains unknown. Congressional action on housing—or on any job-creating measure—has been minimal thus far this session, but making even minor progress on solving the foreclosure crisis, as opposed to minor progress on trade agreements or tax reform, might provide greater results in the end.