Today the Department of Housing and Urban Development released a “Monthly Housing Scorecard,” detailing each of the ways that the government has manipulated the housing market. By explaining the impact of each initiative, the report shows us what to expect if and when the government tinkering ever ends.
Overall Impact of Administration’s Comprehensive Housing Initiative
The President’s housing market recovery efforts began immediately after taking office in February 2009. The Administration’s comprehensive response, as outlined above, has yielded many positive impacts:
- Home price performance has improved. After 30 straight months of decline and an expectation of continued significant deterioration, home prices have leveled off in the past year and expectations have adjusted upward. TRANSLATION: Without continued manipulation, home prices will revert back to their downward trajectory.
- Homeowners have benefitted from the stabilization, as owner equity has increased by over $1 trillion since the first quarter of 2009. TRANSLATION: Without continued manipulation, owner equity will revert back to a downward trajectory and homeowners will lose trillions more.
- More than 2.5 million first time homebuyers have purchased a home using the First-Time Homebuyer Tax credit, helping to stabilize home sales and prices and increase affordability. TRANSLATION: There are now 2.5 million less first-time homebuyers to buy in the coming months and years.
- Mortgages are now more affordable. Due to historically low interest rates, more than 6 million homeowners have refinanced, saving an estimated $150 per month on average and more than $11 billion in total. TRANSLATION: Rates have nowhere to go but up.
- Servicers report that the number of homeowners receiving restructured mortgages since April 2009 has increased to 2.8 million. This includes more than 1.2 million homeowners who have started HAMP trial modifications and nearly 400,000 who have benefitted from FHA loss mitigation activities. Of those in the HAMP program, 346,000 have entered a permanent modification saving a median of more than $500 per month. In addition, HUD approved motgage counselors have assisted 3.6 million families. TRANSLATION: We’ve been able to hold 2.8 million would-be distressed sales off of the market for now…
- Based on newly available survey data, nearly half of homeowners unable to enter a HAMP permanent modification enter an alternative modification with their servicer, and fewer than 10 percent of cancelled trials move to foreclosure sale. TRANSLATION: 90% of the cancelled trials have yet to hit the market.
Here are some charts from the report. I added green and red arrows to show the direction the market was heading and the impact of these government programs.
The problem, of course, is that all of the government’s efforts – the low interest rates, the tax credits, fewer foreclosures for sale – are temporary. Even HAMP is essentially temporary as 70% of permanent mods are now expected to eventually default.
There is no question that housing will quickly double-dip as soon as government manipulation ends. But will it end?
That’s the problem with trying to forecast what’s next: housing fundamentals suggest armageddon ahead, but the government puppet masters could restrict foreclosures and throw free money at homebuyers for years. This Spring, California foreclosure activity is collapsing when, fundamentally, it should be surging ahead…and it’s been this way for 22 months now. Is there any reason to think that this fall will be any different?
June 24, 2010 at 12:07 am
I’m always happy to see more writers giving the government the respect they deserve, and calling them on their total b.s. policies. What the heck would be so bad with letting the free market work as it should? Pathetic. I don’t know if it’s socialism or communism we’re dealing with here exactly, but I do know that it is evil and it makes me ill.
June 24, 2010 at 3:35 am
“socialism”? “communism”?… ah no, this is how our “capitalist” system works. What you’re dealing with is the system as it usually works, revealed. There really is no such thing as a “free market” and manipulation is part of the thing. Blaming whats happening now – brutal attempts to recover stability in the system from the effects of the looting thats been going on for the past while – on political systems is a bit off target.
June 24, 2010 at 5:47 am
Government manipulation was originally supposed to make housing more affordable. The government is now bragging about how home prices are kept historically high due to their manipulation.
June 24, 2010 at 6:27 am
If you were the owner of a house that lost 20% value, you would agree with this manipulation… That is the truth! We want the system to work for us “always” even if it is to fix our mistakes!!! Thanks to shows such as flip this house that would show how much profit homeownership was… I have seen these shows showing profits of 100K in less than a month…. just yesterday, I was watching my first sale and a couple was “crying” on tv because they wanted to make a profit of at least 100k and made only 82K . We all have to clean up this mess weather it is ours or our neighbors… I bought my house in 2005 and I just sold it 2 months ago with a loss. what makes me sick is that those who made money with it will continue to do so in another bubble… whatever that is…
June 24, 2010 at 6:32 am
Housing prices being kept up artificially through government subsidies benefits the banks. The banksters need to keep high home prices (as asset values) to keep them out of jail. Should home prices/asset value decline, then their loan ratios and financial ledgers are in conflict with banking laws – and will/should fail or be taken over by the gov.
June 24, 2010 at 9:41 am
If we assume that the government-banker axis will continue to do everything in their power to paper over the problems, then it is clear that the fake economy will at some point fall to earth. TPTB have already been purchasing stock futures, USTs and mortgages for two years. This game is too clever by half, however, as the taxpayer knows that our tanks are empty–regardless what the shills tell us. We’re losing our jobs, those who still have jobs are seeing our income decreasing, we have far less access to credit, we cannot refinance because our LTV is too high. This longer price discovery is thwarted, the higher the fake economy floats, the greater the terminal velocity of the crash. They can continue their corruption, their thievery, and their lying but they cannot defy the laws of gravity forever.
There will be blood when this ends.
June 24, 2010 at 7:35 pm
In other words we are borrowing from our children so our children can pay higher prices for a house.
June 25, 2010 at 5:21 am
What the government is doing under the guise of “helping to support housing”, amounts to nothing more than PRICE FIXING, and should be completely illegal.
What’s the bottom line here?? All these houses sitting on the market ARE PRICED TOO HIGH–and no smart person would ever buy them at current levels, because they have no where to go but down.
June 25, 2010 at 10:35 pm
I think we’ve transitioned from capitalism to corporatism. Congressional votes are for sale and big companies are writing the rules.
If you get a chance, watch GASLAND on HBO. It’s excellent.
November 14, 2010 at 10:21 pm
the housing prices are being manipulated by low interest rates and by the act of holding back foreclosures from going into the open market to manipulate the supply and demand.