Greenspan has a Good Idea

Greg Mankiw quoting from a WSJ article cites a proposal by Alan Greenspan to aid in the recovery of the housing market:

He did offer one suggestion: "The most effective initiative, though politically difficult, would be a major expansion in quotas for skilled immigrants," he said. The only sustainable way to increase demand for vacant houses is to spur the formation of new households. Admitting more skilled immigrants, who tend to earn enough to buy homes, would accomplish that while paying other dividends to the U.S. economy.

He estimates the number of new households in the U.S. currently is increasing at an annual rate of about 800,000, of whom about one third are immigrants. "Perhaps 150,000 of those are loosely classified as skilled," he said. "A double or tripling of this number would markedly accelerate the absorption of unsold housing inventory for sale -- and hence help stabilize prices."

So for once, Greenspan actually has a good idea. The housing market will only get better when the inventories are worked off and the best way to do that is to increase the pool of buyers.