Distressed properties are often vacant and in disrepair, and thus sold at significant discounts. As the share of distressed sales grows, home prices fall.

The discussion in Washington has changed dramatically. I mean, it's no longer a question of should we address entitlements - it's no longer a question of do we need to reduce spending in the future.

Indeed, the FHA was born out of the Great Depression, which was also caused in significant part by a foreclosure crisis. Mortgages in the early 1930s were mostly three- to five-year 'bullet' loans, which did not amortize and were due in full at maturity.

Defaulting on the nation's debt would be cataclysmic. The U.S. Treasury's Aaa rating is the one constant in the world's financial system. When times are bad anywhere on the planet, global investors flock to Treasury bonds because they know they will get their money back.

Our biggest challenge is to eliminate the popular perception that economists don't have anything useful to say.

Past experience with fiscal austerity at home and overseas strongly suggests that it is best for the economy's long-run performance to restrain government spending rather than raise taxes.

The Obama administration deserves credit for quickly ending the housing free fall. In particular, Obama empowered the Federal Housing Administration to ensure that households could find mortgages at low interest rates even during the worst phase of the financial panic.