Chart: How the US Gov't is Guaranteeing a Second Housing Bubble
Earlier today we looked at how the housing market is teetering atop artificially created price levels engineered through bailout and stimulus. Now, we turn our attention to the official evidence of it. In its latest Quarterly Report to Congress (pdf), the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) documents how, “Supporting home prices is an explicit policy goal of the Government.”
According to Tracy Alloway at the Financial Times:
“…propping up house prices is now an explicit goal of the US government… So explicit in fact, that the Special Inspector General for the Troubled Asset Relief Program has knocked up this little chart to show how various policy programmes (Hamp, MHA, etc.) lead to higher houseprices:”
Alloway goes on to cite the SIGTARP report:
“Supporting home prices is an explicit policy goal of the Government. As the White House stated in the announcement of HAMP for example, ‘President Obama’s programs to prevent foreclosures will help bolster home prices.'”
It’s pretty tough to see how the housing market can reach the kind of equilibrium price levels that will support a sustainable recovery with this unabashed government intervention. When the policy support goes away, which because of its cost it eventually must, the second leg down in housing is likely to follow in short order.
See Alloway’s complete post in Financial Times Alphaville coverage of the US housing bubble v2.0.