As the economic news has been anything but good, with unemployment numbers up, orders for durable goods down, and spending by consumers down across the board in July, is it any wonder the housing numbers have also been sinking, showing a deepening second dip? Some have ascribed the falloff to the end of the the home buyer tax breaks that expired at the end of last April, but the effects of that should have ended by now. But the housing market continues its descent.
The government program that was supposed to help people renegotiate their mortgages in an effort to head off foreclosures hasn't been successful, with nearly 50 percent of 1.3 million homeowners taking advantage of the program dropping out. All the program managed to do was delay the inevitable for a few months. But many of the homes meant to be 'saved' by the program were still foreclosed. I wonder how much tax money all of that cost us?
Another thing driving down the prices of housing is the large inventory of homes being held by banks. With over 2.3 million homes foreclosed since 2007, and the present national median home price of $179600, over $406 billion in real estate inventory is waiting in the wings to be sold. If all of that property were to hit the market at the same time housing prices would plummet even faster than they already have. That might be a great deal for someone looking to buy a home (assuming any bank would be willing to give them a mortgage), but many of those looking to sell homes would likely be forced to hold on to them or sell them at a huge loss.
What's worse is that some have been driven to pull what's come to be known as a buy & bail, where they buy a lower cost home they know they can afford and then let the mortgage on their first home go into default. This has been a prevalent tactic for those deeply underwater on their mortgage where they owe far more than the home is worth but don't want to pour their money into a sure money-losing property.
And the Obama Administration wonders why the housing market trend is still downward?