Yikes: The US Government is 80-90% of the Housing Market
On April 30, the Home Buyer Tax Credit expires. If you’re a buyer, you shouldn’t care because when the credit disappears house prices will drop the same amount. If you’re a seller or real estate agent, you should be scared shitless because you’ll need to drop your price the same amount to keep people interested.
On a scarier note, during a recent Charlie Rose interview with housing expert Robert Shiller, Shiller offered some mind-numbing insights into Uncle Sam’s position in the US housing market:
Charlie Rose: You’ve said that 90% of the housing market is supported by the government.
Robert Shiller: Well, it’s 80% or 90%. Really almost the whole market now is government. And we know this can’t last.
Rose: And that means prices are being artificially inflated?
Shiller: It seems to. Government support is especially prominent in sales of existing homes, which shot up to over 6 million on an annual rate in November 2009, the month that the home buyer tax credit initially was supposed to expire.
On the unsupported side of the housing market, Fannie Mae reported the rate of serious delinquencies (90 Days overdue) for conventional loans in its single-family guarantee business jolted to to 5.52% in January from 5.38% in December. This is a 100% increase since January 2009.
The next eight weeks in the housing market should be very interesting. If you’re looking for excellent research to keep you ahead of the curve, consider a free trial to our new Real Estate Cheat Sheet Premium. Our first 20-page report is fresh off the press, so click here now to get your free copy.