The Administration and Congress have set aside staggering amounts of money for housing and mortgage programs since 2009. HAMP, HARP 2.0, the Attorney General Settlement of $25 billion, the proposed FHA Refi program from President Obama’s 2012 State of the Union Address, HUD’s 2012 Budget of $47,199,000,000, and the losses of Fannie Mae and Freddie Mac to taxpayers of $150 billion puts the amount thrown at housing by various government entities at over $230 billion in recent years. In addition to the over $230 billion, we have experienced mortgage foreclosure moratorium, home buyer tax credit programs, and other measures to “stabilize” the housing markets. [Note: I only include the 2012 HUD budget - HUD has a near $50 billion budget every year].
Streettalklive.com posted this interesting graphic this week showing a point that I have made before (and up above). After all this government intervention into the housing market, housing activity remains in a penalty box.
I decided to look at “the sum of all … interventions” and its impact on housing prices. The orange line is the FNC 20 city index and the yellow box is the area of the intervention.
I included the Moody’s REAL commercial property index as well since commercial real estate did not receive any “benefits” from HAMP, HARP, home owner tax credits and other Federal interventions. Notice that the pattern of commercial real estate prices and home prices are similar despite the lack of intervention in the commercial real estate markets.
To be fair, both the residential and commercial real estate markets benefited from the Fed’s intervention (quantitative easing, purchases of Agency MBS, Operation Twist), which began in Q4 2008.
This raises an interesting question about the effectiveness of government intervention in the housing market.
And what happens when interest rates begin to rise?
Buddy Rojek
February 27, 2012 at 2:22 pm
The solution to the US housing problem is simple.
1. Increase Immigration. Allow wealthy individuals and their families a “Green Card”. They won’t take Blue Collar Jobs, so won’t be opposed.
2. Convert Debt into Equity. The Bank owns the Property in Partnership with the property owner. The owner can choose to buy out the Bank or vice versa.