As analysts, experts and the media have gleefully been predicting for months now, the housing market has officially double-dipped accord to Standard & Poor’s Case-Schiller Housing Index[1]. Home prices have now hit a “new post-recession low” and are comparable to mid-2002 prices. Previously, the all-time post-recession low was logged in 2009. Managing director of Standard & Poor David Blitzer calls the numbers “horrifying,” but emphasized that “it’s focused damage.” He said that because of foreclosures being focused in certain areas of the country rather than having a uniform distribution, the national situation might not be quite as bad as the numbers make it appear. However, 19 of the 20 major metropolitan areas covered by the indices were down in prices. Only Washington D.C. properties climbed in value.
Blitzer credited the federal tax credit for first-time homebuyers with the sag in home prices[2]. He believes that the credit artificially caused prices in 2009 and 2010 to appear to rebound, when “excluding the results of that policy, there has been no recovery or even stabilization in home prices during or after the recent recession.” Do you think that this double dip means that the tax credit was a bad idea, or did it do more good than harm?
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[1] http://www.rew-online.com/2011/05/31/double-dip-declared-as-u-s-housing-prices-tumble/
[2] http://www.mercurynews.com/top-stories/ci_18176409?nclick_check=1
The tax credit backfired.
The policy just hid the real problem for a few months, so yes is hurt people overall. Those that bought into the policy are now joining those which have houses worth less than what they own on them. This is just one way the harm was caused, it further extends the corruption of the entire housing market, and only helped to hide the damage of the current policies.
We need jobs. If we don’t have a job we can’t buy a house. If we own a house and we lose our job than we can’t afford the mortgage. It is just simple common sense. Jobs! Jobs! Jobs!
If my memory of events is correct, this was not the first attempt to spur the housing market. I am fairly certain that credits or loans were offered in the past, (Up to $15,000 I think), so, this is only one piece of the government interference in housing markets. Yes, this turned out to be a dismal attempt to stir up interest, and I feel that it did cause at least as many problems as is solved. However the Obama administration is not responsible for the housing market crash – that rests squarely on his predecessor, his administration, his congress. The Obama administration has many faults, but to ideologically put all the blame on his doorstep is ludicrous. Just look to the 30 years prior to the Obama administration, and see where over TEN TRILLION DOLLARS was added to the national debt, (and considerably more if the Social Security Trust Fund had not been systematically raided to reduce the appearance of deficit spending). Reagan inherited ONE TRILLION DOLLARS of national debt, and added TWO TRILLION DOLLARS during his administration. Clinton inherited FOUR TRILLION DOLLARS, and added ONE TRILLION, SEVEN HUNDRED BILLION. George the second added over FIVE TRILLION DOLLARS to the national debt. This huge national debt planted the seeds for several nasty events that are playing out at this time. Housing may be the most visible, but is certainly not the only problem it has created.
Jim Myers
The housing crisis was caused by very lax standards of lending, and we now had to bail out the banks to prevent bank failure. It will take a while for the banks to recover, but we are now at the opposite extreme. Instead of common-sense lending, we have overly restrictive lending. Until lending policies become more uniform and more “natural” housing will not recover until the mortgage market recovers. We also have to consider that we have no securitization in the secondary market. So banks have nobody to resell mortgages notes to as securitized instruments. This means that they have to service very loan they originate. While not a bad thing, it stops liquidity in the market. The tax incentive for first time buyers was a good thing. It allowed an already overburdened volume of homes to have some movement. We have over a 29 month supply in some cases and anything that can help move that inventory prevents prices from falling further. So the tax credit was indeed a good thing.
The overall issue is not the tax credit, but the liquidity of the banks and the overly strict lending. They are way too strict now, so effectively they are not lending. No lending means no home sales.