Remarkably, the government’s program to promote housing transactions by offering up to $8,000 for every one that was completed by a date certain did just that. Housing transactions just hummed right along for the roughly one year the program was in place. Now that the program is over, what might one expect to happen? Indeed, housing transactions have plunged. According to the National Association of Realtors, that icon of truthiness that always believes there has never been a better time to buy or sell a home (such that their members, who get paid per transaction, will keep sending them dues), existing home sales plunged 27.2% from the prior month (25.5% from July a year prior), for a seasonally-adjusted annual sales rate of 3.83 million transactions. This is the lowest annual rate since they started tracking existing home sales in 1999. But cheerily says Lawrence Yun, the NAR’s economist, home prices increased! I don’t guess there is any connection to fewer homes sold and higher prices. Nope, none at all. If there were, an economist would surely understand such a thing, wouldn’t they?
So, what to do? Remember when I said we are heading to zero percent interest rates? That we’d do anything to keep prices from adjusting downward, and a lower interest rate effectively decreases prices, at least for homes bought on credit? Well, the government has initiated a program doing just that:
This new program will complement Treasury’s Hardest Hit Fund by providing assistance to homeowners in hard hit local areas that may not be included in the hardest hit target states. Those areas are still being determined.
The program will work through a variety of state and non-profit entities and will offer a declining balance, deferred payment “bridge loan” (zero percent interest, non-recourse, subordinate loan) for up to $50,000 to assist eligible borrowers with payments on their mortgage principal, interest, mortgage insurance, taxes and hazard insurance for up to 24 months.
Under the program, eligible borrowers must:
- Be at least three months delinquent in their payments and have a reasonable likelihood of being able to resume repayment of their mortgage payments and related housing expenses within two years;
- Have a mortgage property that is the principal residence of the borrower, and eligible borrowers may not own a second home;
- Demonstrate a good payment record prior to the event that produced the reduction of income.
HUD will announce additional details, including the targeted communities and other program specifics when the program is officially launched in the coming weeks.
Now isn’t that just dandy? You get $50,000 for being a deadbeat? Guess what we’ll get more of? If you said deadbeats, well, pat yourself on the back.
This sort of nonsense is the source of this blog’s name. How can you not be a curmudgeon, i.e., how can anyone that has lived frugally, paid their bills on time and in full, saved for a rainy day, etc., not be irascible and churlish when faced with the prospect of their tax dollars going to fund their neighbors’ extravagances?
Giving away money (“zero interest”; “non-recourse”) is bound to be a big hit. Will it cure the housing systems woes? No. Will it even cure its recipient’s woes? Not likely. As we used to say in the business, once a “C” always a “C”. It wasn’t some unexpected circumstance that caused default. It was failing to properly manage money and risk. And people who don’t get it never will. You would do as well to wait until the winter (provided, what with global warming and all, that we still have one) and put the cash in a pile and burn it for all the good it will do. At least then you’d get something (warmth) out of it, if only for about thirty seconds or so.
This is precisely the sort of thing that makes me utterly despise this country that I at one time was willing to kill and/or die for. Is it really the sum total of our existence here that we are victims of circumstances beyond our control such that we must always rely on handouts from our government shepherds? Disgusting. Simply and utterly disgusting.