According to a Goldman Sachs analysis, interventions by the US government in the housing market added an average of 5 per cent to home prices nationally.
As the WSJ’s Developments blog noted over the weekend, emphasis FT Alphaville’s:
The government over the past year has slowed the pace of foreclosures through moratoria and the drive to modify mortgage terms to keep more borrowers in their homes. It also has pumped up demand for housing by giving tax credits to many first-time home buyers and by driving down mortgage interest rates. As a result, home prices in some areas have risen in recent months, particularly for homes that appeal to investors and first-time buyers. Bidding wars for the more attractive bank-owned homes have become common.
But these artificial props won’t last forever and may have created a false bottom in the market. “The risk of renewed home-price declines remains significant,” Goldman economist Alec Phillips writes in the report, “and our working assumption is a further 5% to 10% decline by mid-2010.
Moreover:
The outlook for further government policy is “cloudy,” Goldman notes. But it is safe to assume that many politicians will remain loath to let the market run free and wild. Goldman points to legislation introduced by Sen. Jack Reed (D, R.I.) that would require mediation between borrowers and lenders before any foreclosures and mandate loan mods in some cases.
Thanks, Uncle Sam. We think.
(Via Bubble Meter)
Related links:
SF Fed: Recent Developments in Mortgage Finance - Calculated Risk
US real estate markets still weak, data show - FT Alphaville
US consumers still not feeling confident. Housing data suggest why - FT Alphaville
Bailout watch, US Federal Housing Administration edition - FT Alphaville
