This Just In: Government Intervention in Housing Market Didn’t Work

September 7, 2010 by  
Filed under Economics

Maybe the voices (including mine) that have been calling for allowing the housing market to seek its own level will finally be heard.

Even the New York Times is now questioning the wisdom of using artificial measures to attempt to quash the epidemic of foreclosures and the decline in real estate values.

None of them have worked. Not one.  The only “benefit” from all of them was a short term increase in home sales due to the first time homebuyer credit. When the credit expired, so did the sales.

The Times article makes a good point. The government’s failed efforts (costing billions in taxpayer dollars) have been directed at helping current owners whereas letting the market slide naturally will benefit future owners.

Who should we help?

I look at it this way. Many of those current owners shouldn’t have been owners to begin with, which is why the government’s “save the un-saveable” programs have done nothing for them.

Other owners were OK to start. Then they began cashing out their illusory home equity to support a personal “living above my means” HELOC borrow and spend program. They have to own that problem.

According to the article, some housing experts have called for an end to government programs that they characterize as “extend and pretend” or “delay and pray.”

I couldn’t agree more.

Here is the full article from the Times: Housing Choice – Help Today’s Owners or Future Buyers

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7 Responses to “This Just In: Government Intervention in Housing Market Didn’t Work”
  1. MasterPo says:

    I had friends who almost lost their house shortly after Obama came to power – I mean won the election – and implemented his first “plan” to help people with troubled mortgages.

    They were turned down. Made too much $$$ – a whopping $80,000 total family income.

    Were it not for another friend they would have lost their house. Government didn’t help.

  2. Jack Clark says:

    “They were turned down. Made too much $$$ – a whopping $80,000 total family income.”

    Let me snap you out of your typical economic elitist thinking.

    Maybe not to you and your LI crowd, but to the rest of us that live in the real world $80K a year actually is a lot of money and in some parts of the country why you would just be about down right rich.

    I know two families personally that have tried to get government help with their housing situations:

    1. Family A lives in NE PA around the Scranton area and due to a long term unemployment has a family income of around 50-55K.

    They applied for various programs from the state of PA and the Feds and they have been told that they make too much money.

    2. Family B lives on LI by Lake Grove. They only make about 175K and are underwater in their mortgage.

    Even though with bonus money they have made over 200K a year they have been told that they do not make enough and that a modification won’t work because the likely hood is that they will never pay back the loan.

    The biggest fallacy about most articles that deal with mortgage assistance is they usually portray the government, banks and loan processing companies waiting with open arms for people to do modifications only to have no one trying.

    It is a 100% lie.

    People are trying, but the road blocks and procedural non sense that are in place make it bordering on the impossible to even have the company the holds the mortgage confirm that they have gotten documents that you sent them let alone actually get a modification done.

    The idea for doing loan modifications is a good one.

    But the process that has been set up is bordering on retarded and it was designed to fail before it was ever even rolled out.

  3. MasterPo says:

    Reality check: It isn’t me or my “LI Crowd”, it’s reality.

    100% agree the cost of living is ridiculous here and not getting any better (which is why NYC and LI are dying a slow and painful death, but that’s a whole other topic).

    NTL, that doesn’t change reality that $80k isn’t much.

    BTW, I lived off LI and out of NY for some time too. Costs weren’t a whole lot cheaper for most things. Sure property was cheaper, as was car insurance and most taxes. But the daily expenses of life – food, energy, clothing, transportation, medicine etc – where about the same.

    In fact, just last month I spent some time in IL. Gas was the same there as here, food the same, lodging the same, Walmart prices the same….

    So unless you’re referring to some back valley coal miner area $80k just ain’t what it used to be pretty much anywhere.

    Please stop drinking Ricky’s Kool Aid.

    • Jack Clark says:


      That part about mortgages, taxes, and insurance that you just conveniently skip over can easily cost a person thousands of dollars a month. Not exactly chump change.

      A friend of mine lives around Hicksville on LI and he’s in about a 1600 square foot home. His mortgage is three times what mine is for the same house and I live in the northern Philly burbs so I’m not in a coal mining hick town.

      I paid $140K for my place and he paid $390K. I also disagree with your assessment of the energy and gas costs. I’m a good twenty cents a gallon cheaper and his utility rates with LIPA are also a good 10-15% more than mine.

      Also don’t even start that lodging is the same. I work for Marriott and I know what a night costs to stay at the LI Marriott in Uniondale and unless you were staying in Chicago there is no way in hell lodging costs were the same in Illinois. 100% not true.

      My family makes a little more than 80K a year and we live very well with our COL.

      You’re right that 80K wouldn’t be much if we lived on LI, NYC, CHI, LA, or BOS.

      But move somewhere slightly suburban and unless you’re spending way beyond your means 80K will take you a long way.

      Please stop assuming that everyone is like you and your LI crowd and that you can look down on the rest of us who don’t fall into the six and seven figure income club. It’s rather disgusting and obviously highly elitist.

      Yes it is possible to survive, subsist, and thrive on a sub-six figure income.

      P.S. The overwhelming majority of people and households in this country do.

  4. Maria says:

    One of the things I find depressing about the current administration is how slow it is to accept the reality of markets. Obama (who is in many cases well intentioned) simply thinks he can use the power of the federal government to push against fundamental market forces (in this case over priced housing and indebted consumers). It was obvious months ago that the only real solution to the housing crisis was to allow prices to find their own bottom. This would, of course, be good for would be buyers and painful for some current owners. Current owners who had not over borrowed would have no problem weathering the storm. The constant interference in markets that seems to be a hallmark of this administration is very costly and downright tiring to watch….

    • MasterPo says:

      Maria – The fact simply is that a lot of people who bought house didn’t belong in houses due to their low and/or shacky financial status. They were able to buy the house because government programs provided “guaranteed” mortgages for ‘low income’ people. And laws – both federal and local – made it illegal (for all intents and purposes) to deny a mortgage to someone due to low income.

      Always remember: 15-10-even 5 years ago NO ONE was crying one single tear about mortgages when someone making $9/hr at Wendy’s was able to buy a $300,000 house with no money down and even finance the closing costs. That was called the American Dream at the time!

      Even today our beloved Federal gov is enacting more programs to help ‘low income’ people buy houses.

      Talk about not learning from the past!

  5. MasterPo says:

    Jack – I agree about property tax. But mortgage interest rates don’t change all that dramatically based on region. Not like a home mortgage on LI will be 7% and one in Richmond VA will be 4% (all other things being equal).

    As for hotels, I just did a search for Courtyard by Marriott. In the St. Louis MO area rates for a Fri-Sun stay for 2 people ran $99-$199 while on LI rates run $129-$199. Not all that much different.

    I guarantee if you and I went into a Walmart here and a Walmart anywhere else the price for clthes, OTC meds, household supplies etc. wouldn’t be that different. Not like a box of ceral or a pack of TP is 40-50-60% cheaper in Philly or Denver than on LI (wish it was).

    Can you show me just 1 reference where I “down on the rest of us who don’t fall into the six and seven figure income club”?

    Seems to me YOU are the one feeling insecure about not being in the “six and seven figure income club”.

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