regarding Bernanke's attempt to re-inflate prices...

Bernie's tools to re-inflate the puppy: (please add to the list if i'm forgetting any... inflating the demand: * tax credit that can be used as downpayment (1st time buyers, might be extended to all), $8k federal... some states offer theirs too (CA's $10k new home buyers credit expired on 7/3/9 btw, traffic and permits went down a lot after this expiration). * artificially low mtg rates (thanks to... [more]

Bernie's tools to re-inflate the puppy: (please add to the list if i'm forgetting any... inflating the demand: * tax credit that can be used as downpayment (1st time buyers, might be extended to all), $8k federal... some states offer theirs too (CA's $10k new home buyers credit expired on 7/3/9 btw, traffic and permits went down a lot after this expiration). * artificially low mtg rates (thanks to super low FFR and buying MBS like there's no tomorrow, part of Bernie's money printing) * use the FHA (now 80% of mtg mkt) to fight the tightening of lending standards, making 3.5% downpayments possible (and payable with the tax credit) supply side: lower the flood of FC as much as possible: * foreclosure moratoriums at the state level * pressure from the feds to do more mods that what servicers would like to (paying them a $1,5k "incentive" to do so). * artificially low mtg rates helps many with ARM to refi and avoid FC (or postpone it). are all of these only temporary? if so, what happens when each of these pieces of RE market manipulation end (if so)? for what to expect when the tax credit ends, check how the end of cash for clunkers affected demand for cars: http://www.ft.com/cms/s/0/12066e64-9293-11de-b63b-00144feabdc0.html?nclick_check=1 Edmunds estimates that, based on visits to its websites, “purchase intent” is down 11 per cent from the average in June, before the cash-for-clunkers programme began. A sizeable number of “cash-for-clunkers” participants already have buyers’ remorse as they contemplate hefty payments on their new car loans, according to CNW, an Oregon-based market research company. Those payments “could negatively impact the total family budget more than expected prior to buying the new vehicle”, CNW reported. [less]