The Obama housing credit masked the rot in the real estate market for a while. They created false demand and only temporarily stopped the slide. Now that the last round of credits have expired, the downward spiral continues.
BOSTON (MarketWatch) — If you thought the housing crisis was bad, think again.
It’s worse.
New data just out from Zillow, the real-estate information company, show house prices are falling at their fastest rate since the Lehman collapse.
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What a foolish boondoggle those tax breaks for home buyers have turned out to be. The government spent an estimated $22 billion between 2008 and 2010 on tax breaks to prop up the housing market. All it achieved was a brief suckers’ rally that ended last summer.
Read the rest: Housing crash is getting worse
Both parties are to blame for this mess. In the 90’s Clinton passed the Community Reinvestment Act that forced banks to give out loans to anyone who wanted them. Bush kept this boondoggle going with his ownership society policies of encouraging home ownership. Barney Frank covered up the risks that Freddie Mac and Fannie Mae were posing to the economy. The fact that both parties support home ownership for all created a distorted market. Rather than let it correct itself, the Obama Regime gave up to $8,000 in tax credits. This created artificial demand that came to an end as soon as the credits expired. The result of these policies are that 28% of all home owners are now underwater on their mortgages.
Home ownership is not for everyone. It actually keeps people locked into a metro area and prevents them from being mobile. In today’s type of economy, one needs to have geographic mobility to get good paying jobs. The fact that home values keep declining keep people stuck in their homes. With falling prices, people are hesitant to buy. People can’t sell if their mortgage is worth more than their home values. This has created deflationary conditions in the real estate market while inflation rages in the economy.
Government intervention never works and real estate is a prime example.
