Reinflating the Bubble
Does anyone else think the Treasury's new proposal is a lousy idea?
From the NY Times:
At the Treasury Department, meanwhile, top officials continued to work on a plan to bolster the housing market by subsidizing 30-year home mortgages with rates as low as 4.5 percent — a level that home buyers have not seen since the early 1960s.
...
But the cheap mortgages would be available only for people buying houses, not the roughly 50 million families that already have mortgages and would want to refinance at a lower rate.
As near as I can tell, the idea here is to entice new buyers with artificially low interest rates. This increases demand for houses and supposedly prevents housing prices from declining further. If we've learned anything from the past 5 years, it's that this kind of thing is unsustainable. Eventually the interest rates will have to go back up, and then housing prices will resume their fall, right? And if that is true, then the incentive to buy a house wanes if you think that your house price may fall once the interest rates come back up.
So basically the government is willing to spend money in order to keep housing prices up--basically keeping the bubble inflated! Your tax dollars at work...
From the NY Times:
At the Treasury Department, meanwhile, top officials continued to work on a plan to bolster the housing market by subsidizing 30-year home mortgages with rates as low as 4.5 percent — a level that home buyers have not seen since the early 1960s.
...
But the cheap mortgages would be available only for people buying houses, not the roughly 50 million families that already have mortgages and would want to refinance at a lower rate.
As near as I can tell, the idea here is to entice new buyers with artificially low interest rates. This increases demand for houses and supposedly prevents housing prices from declining further. If we've learned anything from the past 5 years, it's that this kind of thing is unsustainable. Eventually the interest rates will have to go back up, and then housing prices will resume their fall, right? And if that is true, then the incentive to buy a house wanes if you think that your house price may fall once the interest rates come back up.
So basically the government is willing to spend money in order to keep housing prices up--basically keeping the bubble inflated! Your tax dollars at work...
