A little straight talk on housing from economist James Glassman over at JPMorgan Chase:
Today's credit market turmoil comes with a very big silver halo, at least when it comes to the very long-term outlook for the stock market. Prominent economists have complained over the years that US housing policies—mortgage interest deduction, the activities of housing agencies, and the favorable tax treatment of real estate capital gains—are distorting the allocation of capital in our economy. They don't dispute that homeownership fosters social stability and good citizenship. Yet, in their view, the US is encouraging too many financial resources to be plowed into the creation of houses that could instead be put to more productive uses like factories and technological tools that promote future economic growth.