The Real Estate Bloggers

Officially Real Estate Has Double Dipped

Posted: 31 May 2011 07:17 AM PDT

ChartDown_1 The government’s efforts to fix the real estate market have been officially confirmed as a failure according to recent home sales and price statistics.

The taxpayer funded New Homeowner Tax Credit did perk some life in the real estate markets, but the effects were not sustaining. Now housing prices are dropping as short sales and foreclosures are the dominant movers in the marketplace.

Prices are now down 32.7% from their peak set five years ago.

“Home prices continue on their downward spiral with no relief in sight,” said David Blitzer, spokesman for Standard and Poor’s.

The index covers 80% of the housing market, and this month’s report confirmed “a double-dip in home prices across much of the nation,” said Blitzer.

The housing market went through a brief recovery period starting in mid-2009, recovering nearly 5% of earlier losses. After homebuyer tax credits expired last April, the slump resumed.

Here is the dirty little secret folks. The real estate market can not be fixed by government programs. The market is too powerful.

Cheap lending and irrational exuberance drove the prices to amazingly high levels. The market now needs to find it’s bottom for it to develop a sense of stability. It has been the same song that we have been singing for nearly 5 years now.

The Homebuyers tax credit provided a short term window of pure cash stimulus to get people off the fence, but it was illusionary. The price drop on homes has eaten any benefit up and these people are now looking at a loss.

If we had let the markets work instead of creating programs for a soft landing we would be out of this mess by now. Instead we are looking at a long slog…

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Officially Real Estate Has Double Dipped