May 27, 2009 2
Has Obama Helped the Housing Market At All?
AUTHOR: Colin Keller
One of the largest economic problems that President Obama set out to solve after being elect president with the housing crisis. The steep decline in home prices coupled with an increasing amount of foreclosures and shorts sales have brought the United States economy to its knees. Some analysts are predicting that the current housing crisis could cause the worse recession since the great depression; some well-known pundits think it is inevitable.
There is no doubt that is it going to take some time for home prices to find a bottom before we start to see a stabilization and steady appreciate again. Most experts felt that the bottom would come in March of 2009 when Obama released the Making Home Affordable plan and Ben Bernanke announced that the Federal Reserve was going to buy back over $1 trillion in mortgage backed securities. Both of these events were very significant because they were going to spark the interest in the housing market.
The Making Home Affordable plan was designed to allow individuals to refinance at lower rates as well as gain access to historically low mortgage rates. Well, mortgage rates are going to continue to reach historic lows because the Federal Government is printing money to force mortgage rates to stay under 5%. With rates under 5% and Americans having the opporunity to lock in at historically low rates, wouldn’t you think that home prices would have bottomed in March when these two events took place.
Well, unfortunately that is not the case. The Case-Shiller March data came in very similar to the previous six months: home prices continued to fall. There were only TWO cities in the 20 city index that saw an increase in home prices from the month of February to March. Sadly, those two cities, Charlotte and Denver, were only up 0.3% and 0.1% respectively. This is VERY bad news. If there were any time for the housing market to bottom, it was March.
It is quite possible that many of the mortgage applications did not get completed in the month of March as mortgage lenders were scurrying to complete the process. With the spike in applications, it is very likely that lenders were not able to complete all the applications by the end of the month. We can hope this is the case as this might be the last move before checkmate. I am sure that the current administration has many more plans up their sleeves but I am not sure what can solve the current housing issue. Supply greatly outweighs demand and Americans are losing their jobs; what else is there to do to help this housing crisis?
Ultimately, President Obama and his administration are trying very hard to help the housing market but in the long run free markets have to work themselves out. When we see that some of the housing supply comes off the market and there is a growing demand for homes, we will see a bottom in home prices. My question to you is, has Obama helped the housing market at all?