How Washington’s Housing Rescue Plan is Hurting Housing Sales
Remember the classic Ronald Reagan line, “The nine most terrifying words in the English language are: ‘I’m from the government and I’m here to help.’” Well, those in the real estate business are probably going to be saying it often around the water cooler in the coming months.
The housing rally we have seen this past spring is in danger from rising mortgage rates. Read the following to see how government programs to help the housing market are raising interest rates and putting a huge burden on the housing market.
But this and other big government spending programs are turning out to have the opposite effect. Rates for mortgages and U.S. Treasury debt are now marching higher as nervous bond investors fret about a resurgence of inflation.
That’s the Catch-22 threatening to make an awful housing market potentially worse and keep the economy stuck in a funk. Kick-starting the economy requires higher spending, but rising rates mean fewer Americans will be able to refinance their home loans. And some potential buyers will be shut out of the market by higher monthly payments they won’t be able to afford. My Way News
The math is quite simple, add trillions of dollars of debt in the name of stimulus and you put pressure on the lending market. There is only so much money available to borrow. That forces you to borrow from lenders who are not normally in the treasury market and they demand higher interest rates. Think of Guido the loan shark when you can not get a bank loan.
You get the money but you quickly realize that you made a mistake when it comes time to pay it back.
Add to that a fear that the United States will be unable to repay the tremendous debt that it is occurring and that a currency devaluation is possible and lenders become even more scarce.
So we are faced with a big problem. Do we continue to finance a recovery plan that is bloated and face the higher interest rates? Or is the alternative an uprising by the people, not violent but loud, that forces the government to focus on fiscal responsibility?
I would vote for the latter but I am one voice out of many. In the meantime I will leave you with this chart to remind you of how spending has increased by Washington in the past year and is scheduled to increase in the future. 
My mom told me to put the statue in the ground, just seems wrong to me but I did it. ...
What about RE/MAX Commercial? Where this classification came from?
I am pretty sure RE/MAX Commercial in volume sales must be above ...
Well Tom, once again you have said it much better than I could have. Unfortunately the folks at Move, ...
It certainly does not bode well for a fast recovery in the economic climate. This will affect all real estate ...
I HAVE 25 YEARS EXPERIENCE IN TELECOMMUNICATIONS..HOW DO I APPLY AT KAI. 
Definitely not a fan of Move Inc.!!! 
A lot of you really need to go back to kindergarten and learn to spell correctly. If you cannot spell ...
In 2008, there was an extension to push first-time home buyers to purchase their homes quickly since the program did ...
I also need HELP and don't know what to do about my problem. I have a garden apartment off ...
I have the same situation. I sold my home in July and am scheduled to to close in a few ...
Comment by Portland Real Estate on 8 June 2009:
Thank you President Reagan for creating the system that is crashing today. It was warned about before, but not listened to. Blame the current administration if you want, but the mistakes were made decades ago to invent imaginary money that people can pass back and forth in this industry.
Pingback by Daily Digest for 2009-06-08 | Joe Spake - Memphis Real Estate on 9 June 2009:
[...] Posted an item Joe Spake: How Washington’s Housing Rescue Plan is Hurting Housing Sales : The Real Estate Blogger… [...]
Comment by Mike Allen on 9 June 2009:
Government is rarely the answer.
The ideal solution to the housing problem is one that solves the root problem (to much supply / not enough demand) and costs the tax payer nothing… “inconceivable” you say, oh yea of little faith… it has been discussed by many economists. The solution could come from immigration. I know from living abroad that there a tons of people (good people) with plenty of money that would buy a house in the US if it included a greencard as part of the deal.
I commented a little more about “how we get out of this mess” here:
http://blog.homeprodigy.com/home-prodigy-blog/each-founders-journy-blog/28-housing-bailout.html
Pingback by Real Estate news from the Cutting-Edge | Memphis Real Estate Buzz on 9 June 2009:
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Comment by Rental Management Company on 11 June 2009:
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Comment by Jen84 on 12 June 2009:
This economy is just a mess right now with people still hanging on to a false economy from when the housing market peaked. Buyers are overbidding and foreclosures already have 3-4 offers in the first few days. It’s extremely competitive and almost trying to reach a seller’s market, but with rising mortgage rates and a gloomy forecast for jobs and loans, that bubble that’s trying to expand is bound to pop again and we’ll all end up in bigger shambles than what we thought we were in. It’s such a fragile market right now that the government is bribing people to buy houses, but even then, will people make the best financial choices in this unstable economic recession?
Pingback by Mother Lode Real Estate “Must Reads” for June « myBlog on 16 July 2009:
[...] marketing). Jay Thompson thinks otherwise and offers good support to back it. A definite must read.How Washington’s Housing Rescue Plan is Hurting Housing Sales by The Real Estate Bloggers. Must read information on how the crazy spending by our nation’s [...]