Housing Re-Boom? Not So Fast…
Friday, May 29th, 2009Housing is not going to be the engine to get us out of this recession,” said Robert Eisenbeis, chief monetary economist for Vineland, New Jersey-based Cumberland Advisors Inc., and former research director at the Federal Reserve Bank in Atlanta.
Interest rates have dropped in an effort to incentivize a mortgage re-boom. But it’s not enough for homeowners, who increasingly have their eyes on a 4% interest rate. With mortgage defaults still at record highs. and home prices dropping, it’s becoming ever clearer that there’s not enough fuel in the housing furnace to generate any kind of heat for the economy at large.
With less refinancing going on than expected, there is less extra cash in the pockets of homeowners to be thrown around to reinvigorate the economy. President Obama’s $8000 tax credit is falling short of expectations in terms of motivating people to buy new homes. Freddie Mac estimates 73 percent of the projected $2.7 trillion of mortgage originations in 2009 will be for refinancing.
Without a recovering housing market to single-handedly drive the economy back to health, it seems the economic recovery will consist of myriad efforts, fanning whatever flames can be found in the embers of our erstwhile prosperity.
