Down-payment ‘insurance’ for housing market?

Prof. James A. Wilcox

Reading an op-ed piece by James A. Wilcox in the New York Times yesterday, I was struck by the novelty of his ideas for what amounts to government-backed insurance against a loss in home equity.

But the more I read the column by the respected economist, a business professor at the University of California, Berkeley, the more dubious I became. He writes:

Down-payment protection would provide a sensible and affordable way to restore confidence.

He contends that a large number — perhaps two million — of potential buyers who are renting or living with relatives hesitate to take the risk of making a purchase even if they have good jobs and credit histories.  Says he:

While near-record numbers of houses all over the country are empty, the sidelines are crowded with this huge ‘shadow demand.’

His solution for activating that demand, whatever its dimensions, would be