Mark J. Donovan
Not surprisingly new housing sales data suggests that the United States is entering a double dip housing market recession. Home sale prices stagnated in June, only increasing 0.1% and in a number of areas of the country home sale prices actually declined several percentage points.
As I have said before, this should not come as a big surprise to anyone who has their own reasoning skills. With employment at nearly 10% officially, and nearly 20% unofficially, and the end of the home buyer tax credit what else could be expected. Add to these facts looming tax increases for everyone with the soon to end “Bush Tax Cuts” and tight mortgage lending, and it is no wonder why the American public is skittish on purchasing high priced items such as homes.
So what’s causing this second double dip housing market? Not surprisingly, Keynesian economics. With Keynesian economics the government takes a more active role in managing the flow of money through lower interest rates and “stimulus spending”, such as the home tax credits that have been handed out up until the end of April. Though the home tax credit provided some instant gratification for a sagging housing market it has negatively influenced the housing market for the long haul. Pent up home buyer thirst was slaked by the home tax credit that has now expired. Unfortunately, like a camel, the housing market thirst has been quenched for some time to come.
As a result, don’t be surprised to see any real improvement in the housing market until sometime in 2011, and only if federal economic policy has begun to change. Let’s all hope so. A continued economic policy of stimulating an economy by mainly giving out government handouts with fiat money, while at the same time having no private sector job growth, is a recipe for national economic disaster.
Monday, July 12, 2010
Mark J. Donovan
Posted by Mark Donovan at 12:42 PM