The government is trying to fix the housing market. They’re giving you money to buy houses. They are rewriting contracts to save you from the consequences of bad mortgage judgement. They are even giving banks cash to be more flexible with lending. What’s the result?
Uncle Sam’s effort to goose sales raises a basic question: Do tax incentives strengthen the long-term outlook for the housing market or simply create a short burst of activity that masks continuing weakness?
The US Bureau of Labor Statistics says the nation’s unemployment rate last month rose to 10.2%, the highest in 26 years. Some analysts say the unemployment rate may remain above 10% for the first half of 2010. A weak economy and uncertain employment prospects almost certainly will cool the housing market when the incentives expire.
The Mortgage Bankers Association says delinquencies continue climb and a record 14% of homeowners were behind on mortgage payments or in foreclosure in September. The hardest hit states are Arizona, California, Florida, and Nevada which together accounted for 43% of new foreclosures.
A research report by Wells Fargo Bank says the record-high $1.4 trillion federal deficit now totals about 10% of Gross Domestic Product and could slow future economic growth.
Read the rest from Scott Reeves at Minyanville.com here.