Home prices in 20 metropolitan areas across the country dropped at a record rate of 18 percent in October 2008 from a year earlier as the fallout from the financial collapse reverberated through the housing market. The housing market has still not recovered completely or evenly and prices in many cities are still below their pre-recession peak.

Housing bubble aftermath

“What’s even more incredible is Team Obama’s stubborn refusal to have any faith in the free market. In some of the hardest hit areas of the country, markets are already solving the housing problem. If the government really wants to help, instead of bailing out irresponsible mortgage holders, it should support new and younger families who want to buy starter homes and begin to climb the ladder of prosperity. All this is free-market economics 101. And I say, let free-markets work.” — February, 2009

Analysis: The Obama administration’s plan to help homeowners included a litany of programs, including reducing the debt that distressed borrowers owed. The success of these programs was mixed but recent studies show that they did, in fact, help millions of people stay in their homes.

Mr. Kudlow’s claim that the markets were already “solving” the housing problem was not accurate, given that the housing market still has not recovered in many areas, including those hardest hit.

In 2009, banks were — and in many cases remain — incredibly reluctant to make loans to all but the highest-quality borrowers. That does not generally include new and younger families, who have little credit history and are considered riskier than those with a track record of on-time payments. Without the government assisting borrowers who were in danger of foreclosure, the economic fallout from the crisis would have been even deeper, more severe and longer-lasting.

Before the Great Recession

“At home in the U.S., there are still housing-slump worries and concerns about an inventory correction in autos and factories. Former Federal Reserve Chairman Alan Greenspan this week even predicted a recession, naming the budget deficit as the cause. Huh? The deficit is evaporating as record tax revenues are being generated by a solid economy, itself a function of the low marginal tax rates put in place by President Bush.” — March, 2007

Analysis: That solid economy was not so solid after all and Mr. Greenspan’s prediction of a recession came true. By December 2007, the United States was officially in the Great Recession. The budget deficit did not evaporate but ballooned and continues to grow today, with the nation approaching a $1 trillion annual deficit.