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Yes, the numbers appear much improved, but there's this nagging concern that the government's $8,000 tax credit and the highly attractive terms for FHA financing are essentially propping up the housing sector - and that if the government were to remove those supports, home sales would collapse. (It's not much different from the debate over the economic benefits of the cash for clunkers program.) Well, the tax credit will expire towards the end of the year and the real estate industry is now lobbying for an extension into 2010 - not just for the $8,000, but for an expanded program that would provide a tax credit of up to $15,000. From the NYT:
Mortgage applications increased nearly 10 percent for the week ending Sept. 3 from late August, the largest gain since early April and the latest of many signs of life in real estate. The upturn can be attributed to several factors: the return of confidence, very low mortgage rates, and prices in some markets that are at decade-low levels. But the looming expiration of the tax credit on Nov. 30 seems to be playing a role too, particularly in relatively low-cost markets like Phoenix, Las Vegas and Dallas.
[CUT]
Economists are sharply split on the merits of another round of government help. Mark Zandi, chief economist of Moody's Economy.com, favors expanding the credit to all home buyers, even investors, into next summer. "The risks of not doing something like this are too great," he said. "I don't think the coast is clear." James Glassman of JPMorgan Chase echoed those views but said he favored continuing to restrict the credit to first-time buyers.
By the way, government-insured, FHA mortgages made up 37.4 percent of all Socal purchase loans in August, up from 37.0 percent in July and 27.1 percent in August last year, according to the latest Dataquick numbers.
Mark Lacter created the LA Biz Observed blog in 2006. He posted
until the day before his death on Nov. 13, 2013.