For a while, the real estate market was the top priority of media outlets as it became apparent that it was at the heart of the financial collapse. As the initial wave of coverage subsided, real estate took a back seat to health-care reform and the well-publicized public outcry over the practices of investment banks and other major financial firms. Now that health-care is behind us and Congress is negotiating a bill to rein in financial institutions, the housing market is once again making its way into leading headlines—and not for good reasons.

For the fourth straight month, sales of new homes fell in February. The 2.2 percent drop-off left sales at a paltry 315,000 units, marking a new record low and instilling a renewed sense of fear and uncertainty for the economic recovery. At the end on 2009, nearly 14 percent of all homeowners were delinquent on their mortgage—a drastic increase from previous numbers—and it appears that things are only going to get worse. As we’ve reported previously, massive amounts of homeowners are underwater and an increased number of foreclosures is virtually inevitable.

Thanks to the Home Affordable Modification Program from 2009, over a million borrowers have had their payments reduced, although less than one-fifth of these modifications are permanent. This assistance program is designed for homeowners who are current on their payments or have recently fallen behind. The idea behind the program is to curtail foreclosures, which may lead us into a dreaded double-dip recession. Despite efforts by the government to abate the rampant number of foreclosures, people are still losing their homes at an alarming rate, and many analysts predict that the situation won’t improve anytime soon.

This week the Obama White House announced that they would try to squelch the perilous level of foreclosures with a $14 billion plan aimed at eliminating debt for homeowners and reducing their mortgage payments. The new plan, which will be funded from remaining money leftover in the TARP, will provide the most aid to the unemployed and those in areas where the real estate market has experience the sharpest decline. Instead of giving the funds directly to homeowners, the new plan will provide lenders with incentives to work with homeowners to restructure their mortgage contracts.

Most people look at the bank bailouts with contempt and animosity, but the bailouts of the housing sector are in the same vein. Essentially, the government is trying to reconcile bad loans that were taken out and given, and while many people look at the lenders as the bad guys, the truth of the matter is that both parties are to blame. And unlike the bank bailout where the majority of the funds were repaid—with interest—there is no way to recoup the taxpayer money that is being pumped into the sinking real estate market.

The problem with the real estate fix—and the bailout of the big banks—is that it doesn’t do anything to solve the core problem. No matter how you try to spin it, the fact of the matter is that stocks and real estate were drastically over-valued in this country. Despite how much it may hurt or be unpopular, someone is going to have to end up being a loser. From the person taking out the loan to the financial engineers who constructed the complex mortgage derivatives, people all along the chain are somewhat responsible. By using taxpayer money to attempt quick fixes, we are ignoring the core problems and setting ourselves up for a relapse. These plans will require all taxpayers to have a part in the recovery; there is still nothing to prevent the same thing from happening again.

As uncomfortable as it may be, we need to stop shoveling money into a broken system and allow people to recognize their own losses instead of subsidizing them amongst our neighbors. The government is currently $12 trillion in debt with no plan for repayment, and every new initiative of government spending only deepens the hole. Since we still have some clout in the world economy, other countries are still buying our debt—but that won’t last forever. Moody’s recently reported that the US was in risk of losing their AAA rating and yesterday’s selloff of five-year bonds showed little demand. If we don’t let companies and individuals experience the repercussions of their decisions, it may be our government that ends up going under instead.

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