Sunday, January 3, 2010

2010 what next?

Well what do you think 2010 will bring?

Will the government leave the market alone this year? That's probably the biggest question mark looking ahead. We had something of a stabilization last year but nearly all of that was due to massive government intervention in the market. This year much of that intervention is due to end. The MBS purchases by the fed that are keeping the interest rates low is due to end in late March. The tax credit ends in late April. The Tarp program will have run its course for the most part (and a dismal failure it has been so far). So what will happen when all these programs end and the market is left to fend for itself?

I don't want to even throw out a guess after last year. It's just too hard to figure what the government will do next. Personally I think the poo will hit the fan without more intervention. But what they will come up with next is beyond me. Once all the government life support ends the market could do just about anything. My personal feeling is, at this point they have all but assured a Japan style decade of price declines or stagnation at best. We may see some blips of recovery but I feel the overall trend will be negative for many years ahead. The only way around it is to let the free market fix it. Foreclose on the bad loans, book the loss and sell them in a free market. There's more than enough money out there to fix this market quickly if they would only let it happen.

3 comments:

tim said...

I honestly don't understand the concept of a "free market" when it comes to housing. I looked at a house in Rowland Heights which has been on the market for over 1 year. It's priced at $350k and it's a short sale. Oh, and it's 1k square feet in size. All the other houses in the area are selling for $350k as well, but I don't know if those are short sales or not. Aside from it being a short sale, there's no way that house is worth anywhere near $350k.

Anyway... free market is not something I understand. How does free market pricing correlate to appraised pricing? I mean, if everyone says they won't pay more than $200k for a house, but it's appraised for higher, what then?

Martin Burtin said...

2010 will also be an election year, and the Dems probably will want kick the can of the foreclosure crisis at least far enough down the road to get them beyond the elections. So, I don't predict much free market housing economy while the banks and Dems still have their shadow inventory cloaking devices and tarps and hamps and crapola.

Todd said...

The gubment lifting the $400 billion cap on Freddie and Fannie (effectively writing them both blank checks) back on 12/24 tells me that someone is thinking about dumping a lot more money into the housing market (perhaps in the form of cram downs). Is it REALLY that hard to understand that the housing market finding its natural bottom is a good thing for everyone? This whole "let's reinflate the housing bubble" mentality is really wasting a lot of our taxpayer money. I know, I know... they'll just print some more money and raise taxes on "the rich" and all will be better.