I will say it, the LAST thing the housing market needs right now is more new homes. 

A couple of days ago I made a post about my opposition to a builder bailout; this idea was something that was being thrown around Washington recently from the National Association of Home Builders.  They are getting hit hard, understandably.

An article put out by Reuters that was on CNBC.com the other day showed that new home sales are at their lowest rate since January of 1991.  And when you consider that existinghome sales are up 59% from 1991 that tells you just how devastated the home building industry is.  There are more people that live in America in 2008 than in 1991, there are more existing home sales, yet NEW home sales are virtually unchanged - this is alarming.

The predicament with the home builders and the housing market is that by my estimates, we have approximately 1.5 million too many homes for sale.  It is this excess supply of homes that are causing downward pressure on home values which is ultimately leading to foreclosures when home sellers are unable to refinance or sell their home.

And I don't think I am going too far out on a limb when I say that it is the housing market and these foreclosures that are the root cause of this global economic crisis.

I know this opinion is going to be wildly unpopular with the home building industry, but it's true - but give me a second.

The predicament is that the home building industry has a large "GDP" associated with it.  A lot of industries (mortgage, real estate, title, inspectors, appraisers, materials, etc) benefit when a new home is built - including municipalities because of the new source of tax revenue.  And if you have been reading the news lately, there are more and more reports surfacing about municipalities struggling to make ends meet.

What the ECONOMY needs is for people to start buying new homes again.

The solution is that we need to provide Americans a new fiscal policy, a new tax incentive, to invest in real estate.  What this will allow us to do is absorb the excess supply of housing as well as stimulate new home construction.  We need to inject new demand into the housing market.

With all of the talk of billion dollar bailouts and preserving our financial and banking infrastructure, Washington has overlooked the housing market - the engine of our economy.