Okay, I confess, this question went through my mind as my wife and I were house-hunting about 18 months ago (although I resisted asking the question out loud): “Why should the government or anyone else attempt to artificially sustain or inflate the price of houses?” After all, if you look at it from their perspective, the interests of homebuyers can actually be harmed when assistance is provided to homeowners.
At least, that was the gist of a story in Sunday’s New York Times (click here for the article).
Implications: As someone who bought a home shortly before all the incentive plans were rolled out, I can relate to the NY Times story. But more importantly, one should ask whether similar dynamics are in play in other categories. For example, used vehicle prices are up right now, largely due to the Cash for Clunkers program that expired a while back… which took supply out of the market. (It is not lost on me that another factor in rising pre-owned vehicle prices is that in a tough economy, some new car buyers gravitate more to the used lot.) The program that was designed to help car buyers and the auto industry last year is arguably costing some car buyers money this year.
Bailouts are likely to become—at least—less popular as we move forward. For one thing, the tax bill for these items will be coming due soon. But also, consumers are now getting used to living on more restrictive means; in that environment, they know somebody else’s loss might be an opportunity for their gain.
Mike Anderson
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