by Bill McBride on 10/24/2009 11:45:00 AM
Saturday, October 24, 2009
From James Hagerty at the WSJ: Uncle Sam Adds 5% to Prices of Homes, Goldman Says
Uncle Sam’s interventions in the housing market have pushed home prices 5% higher on a national average than they would have been otherwise, Goldman Sachs estimates in a report released late Friday.In the research note, Phillips discussed how policies have reduced foreclosures, and stimulated demand with both the first-time home buyer tax credit and "abnormally low mortgage rates". Phillips wrote (no link):
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.”
"In 2010, we expect some of these supports to fade. Fed and Treasury purchases of mortgage-backed securities will taper off, and the pause in foreclosures created by federal mortgage modification programs may end.Based on Goldman's estimates, the first-time home buyer tax credit probably cost around $80,000 per additional home sold. Ouch.
The federal tax credit for first-time homebuyers appears likely to be extended for at least a few months, but probably no longer than through the first half of 2010."
The report isn't all negative. Goldman believes "the brunt of the price decline is behind us" and the outlook is uncertain: "the cloudy policy outlook adds to our already considerable uncertainty of where house prices will ultimately bottom".
This is very close to my view, see: The Uncertain Housing Outlook
Posted by Bill McBride on 10/24/2009 11:45:00 AM