Housing Recovery? One Expert Says No
Dean Baker called the housing bubble when he published published “The Run-up in Home Prices: Is It Real or Is It Another Bubble?” in 2002. In the attached article and video he predicts that the end of government support programs will reduce the number of buyers for the balance of 2010. This is an interesting and telling interview with CNN News. You can view the video at this link: http://tinyurl.com/23k9bdm
Mr Baker argues that government programs that have come to an end have propped up the market and are unlikely be extended, resulting in fewer buyers. The First Time Buyers Tax Credit ended in November and was extended to the end of April. The Treasury Department purchased $1.25 Trillion of mortgage backed securities keeping mortgage rates artificially low. Mr. Baker predicts niether program will be continued and that mortgage rates will rise to 5.50 - 6.00% by the end of this year. Additionally, FHA to some extent has replaced the subprime mortgage market; but is being forced to curtail some of its lending due to falling below its minimum capital requirements. He ultimately argues that the government propping up housing prices does not make sense.
What do you think?
Ted Akers is the Managing Member of Investor Funding Alternatives which funds investor purchases for back-to-back transactions at www.InvestorFundingSite.com
Comments (8)
James, I agree there also. Some experts are predicting 2-5 years for hotter markets, but I have seen several talking of a 2020 type time frame for some of the hardest hit areas.
Ted Akers, almost 14 years ago
Ted, As for the Real Estate Markets returning to the early 2000's values, personally I think we might be looking at a 10 year time period or maybe longer in certain areas. But, this is all just my opinion.
James Ward, almost 14 years ago
James, I agree there also. I think we will have high foreclosure numbers through early 2012, that it will take that long or longer to replace or reinstate lost jobs, and that some areas of the country could take many years to return to 2007 valuations.
Ted Akers, almost 14 years ago
Very interesting atricle. My personal opinion is that we have a long way to recovery. I am talking years. James
James Ward, almost 14 years ago
I agree 110% Tod. Without strong employment increases I think we are a long way from being out of it. We have lost 8 million jobs since 2006. I think both 2010 and 2011 will be interesting to watch playout.
Ted Akers, almost 14 years ago
I agree. It's almost the perfect storm. Continued high unemployment, higher interest rates, discontinued government programs artificially propping up the market. I'm anxious to see how the rest of 2010 plays out.
Tod R., almost 14 years ago
Thanks Allison, I attended a seminar with the chief economist for Stewart Title. He and others have estimated that the Tax Credit only contributed one out of four buyers that purchased strictly because of the tax credit. So, at $8,000 credit per buyer and for each 4 buyers it is a cost of $32,000 in tax credits for each home sold. He predicted it is very unlikely to be extended again.
Ted Akers, almost 14 years ago
I was just wondering about this issue - asking myself how long will this last? Why wouldn't they extend the Tax Credit some more? I will watch the video. Thanks for the post. Excellent conversation for us to have.
Alison Feliciano, almost 14 years ago