The SIGTARP has apparently gone and illustrated the ways in which is government is propping up home prices in the US.
As an investor, why would I buy something when I know the prices are being artificially inflated?
Further, why is the government using tax dollars to attempt to force me to overpay for a home?
As a renter, shouldn’t I be entitled to the same tax rebate as a home buyer? Is it not effectively a tax on all renters in the US?
Unfortunately, I guess stupid, overlevered property owners are a larger voting block than rational thrifty renters…
UST
Fed, Housing, UST
Another 3pm’ish announcement from the government today. Timed as always for maximum effect against anyone bold enough to short the stock market. This isn’t the first time and I’m sure it won’t be the last. I could rant here about this, but I’m going to leave that to another post.
In the meantime, I’m going to go out on a limb and call this plan DOA not an hour after it was announced. Why? Because there’s no fix for what ails us other than time and pain. The government can ill afford to prop up the housing market with subsidies. It’s mortgage stabilization writ large with the taxpayers eating the loss.
Despite all the protestations to the contrary – the bad debt has to be written off by someone. Either it’ll be the debt holders or the US taxpayer through some messed up government intervention program that will only further impoverish the American people. Plain and simple. There is no other way out of this.
Expect at the least the bond market will call their bluff starting tomorrow.
Uncategorized
Bailout, Housing
Everyone has been and continues to be focused on “arresting the downward spiral in home prices”. In fact, the Fed is now purchasing MBS (Mortgage-backed Securities) to the tune of about $4B per day. This is in an effort to lower the rates used to generate new mortgage lending and thereby support the purchase of homes and hopefully the prices.
I’ve said this before, but I’m going to say it again because it bears repeating -
Our problem is not home prices. They are SYMPTOMATIC of the larger problem that is plaguing our economy. Wage growth in this country has largely been stagnant for THREE DECADES. Until our economy turns around and wage growth returns to a normal trajectory, there will be no bottom in home prices. Even once we fix the demand problem, we’ll still have an inventory problem.
Eventually this will be publicly recognized by legislators and bankers.
Additional reading:
Falling prices have appeal to those with stagnant pay
http://www.latimes.com/business/la-fi-lazarus17-2008dec17,0,2715648.column
A little dated but a seminal paper from 2006
http://www.epi.org/publications/entry/bp195/
Uncategorized
Housing, Wages
