Realty Check

Housing 'Expectations' Shifting Due to Stimulus


I'm not sure if it's politics alone or the politics of economic prediction, but I'm seeing an awful lot of "revised" housing expectations as we head into fall.

Bank owned home

Just this week Fannie Mae put out its "Economics and Mortgage Market Analysis" for September.

Chief economist Doug Duncan writes, "The large pullback in home sales after the tax credits' expiration suggests weakening home prices in the third quarter."

He calls a housing bottom, "elusive," and revises his 2010 projection of basically flat home sales to -7.4 percent.

And then came Moody's "ResiLandscape" report for September. The headline: "A Longer and Deeper Housing Correction" Thanks to the end of the home buyer tax credit, "The housing market's nascent recovery is back-sliding into a double-dip," says author Celia Chen. And so Moody's has revised its forecast for a home price bottom from Q1 of 2011 to Q3 of 2011. "Prices will descend until distress sales represent a smaller share of total home sales," writes Chen.

I guess I'm wondering why all the revisions.

I don't pretend to be an economist, but didn't everyone predict a fall-off from the end of the home buyer tax credit? (We saw it after the end of the first credit last Fall). Haven't we been watching the poor performance of the Administration's mortgage bailout? Did I miss something about a surge in new employment?

On Monday CNBC will hold a town meeting with President Obama, and I'm sure someone will ask him whether or not he believes we need more government stimulus in housing.

So far the President has left most of the housing talk to his troops at Treasury and HUD.

The arguments for and against government stimulus in housing are both strong, and the price to pay for both is high. Either we let housing go through a long and painful correction or we continue a cycle of artificially stimulated boost and bust, as was the case with the tax credit.

I guess that's why it's so hard for all these economists to stick to their forecasts.

Questions?  Comments?