If we want home prices to bottom, well then we must let them fall.
The few bright spots appear to be a result of government stimulus, the homebuyer tax credits in particular. However, rather than jump-starting the market, the government’s interventions seem to have only had a temporary effect that evaporated as the stimulus expired.
Housing supply vastly outstripped demand in 2010, especially when one considers the shadow inventory of homes with mortgages in default or foreclosure. This state of affairs continues into 2011. As a result, RPX metrics continue to show weakness.
One benefit of gridlock in Washington is that our government will be hampered in its ability to meddle in the housing market.
Two well-respecting analytics firms are expecting a double-dip in home prices that would erase gains from the last year.
Government efforts to prop up the market have only served to reduce sales volumes and eliminate an important component of the move up market.
The second reason is that, Mr. Yun notwithstanding, most people simply do not believe that housing prices are even close to hitting bottom. “In the Bay Area, a house that was worth $300,000 a decade ago became a million-dollar home,” said Greg Fielding, a real estate broker and blogger. “Now it is listed at $800,000.” That price, he suggested, was still unrealistically high.
Can we really blame the drop all on the loss of the tax-credit? Or are the tax credits simply a convenient scapegoat, distracting us from greater economic forces at play?