Here’s another chart derived from the Federal Reserve’s latest Z1 Flow of Funds Report showing an improving situation for homeowners – home prices having now stabilized a bit with outstanding mortgage debt on the decline, partly due to losses being taken by banks.
Just think how much lower both of those curves would be if not for the government’s homebuyer tax credit and freakishly low mortgage rates that have combined to support home prices while banks continue to be in no particular hurry to kick non-paying “homeowners” out of their houses, thus wiping out the mortgage debt and realizing the loss.
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I’d love for those levels to be lower. That might actually help housing become affordable. It’s too bad the gov’t got involved and kept housing unaffordable…
In another 20 or 30 years they’ll look back at this period and laugh, saying that they let a housing bubble inflate and pop and then tried to prop up prices for years rather than letting market forces undo on the way down what they did on the way up.
These government subsidies are just crazy when you think about them – the mortgage interest deduction, the property tax deduction, and the tax-free capital gains were all bad enough but now the government originates and/or backs 90+% of the mortgage market, keeps interest rates at what Tim rightly calls “freakishly low” levels, and, up until a month ago they gave away $8,000 with each new home purchase.
This madness has got to stop someday……
[...] good news is that property values (nationwide) are stable! The bad news is that mortgage debt is falling. Why is that bad news? It’s not that we are [...]