Today's KCM Blog Post "Job Creation: Only Solution for a Housing Recovery"
The government has tried many stimulus programs to re-energize housing. They attempted to kick-start demand by offering the First Time Home Buyers Tax Credit and they did have some success originally. They extended the program and added a provision for move-up buyers also. Even the government admits that the extension may not have increased demand but instead just moved it forward. In any case, demand has fallen off dramatically since the expiration of the program April 30, 2010.
The FED also tried to entice buyers to the market by keeping interest rates low with their program of buying mortgage-backed-securities. This coupled with the tax credit gave the real estate market some life in the first four months of the year. Rates have remained low and many have refinanced but purchase applications (mortgages for people buying homes) have plummeted.
The supply of distressed properties has increased substantially despite government efforts to help people avoid foreclosure through loan modifications. Only one in ten people determined to be in need have been given a permanent modification. A new study shows that 55-75% of those who have received modifications will re-default.
We can see that the initiatives to boost demand and curtail supply have not been successful.
Many are now coming to the conclusion that only one thing can turn housing around: the creation of jobs.
Harvard’s Joint Center for Housing Studies clearly defines the challenge in their State of the Nation’s Housing 2010 report released this month. The report explains the importance of sustained job growth to the future health of the housing industry:
