Fed & MBS, Homebuyer tax credits
Interest rates continue to be at historical lows. The $8,000 first time homebuyer and $6,500 repeat buyer continue to be in place. Both or these have prevented housing from falling faster and farther than it should have. However, come this Spring, the tax credits are set to expire and the Fed backing of mortgage backed securities is “supposed” to come to an end. This could mean interest rates go up by 1% or more (or less) and $8,000 will not longer be availble to make that purchase. Thus, house prices will continue their slide just as the Option ARMs start to default in force.
So the question is: Who thinks the fed will continue the tax credits and mortgage backed securities past this Spring in order to continue propping up housing and thus the economy? If the goverment really does decide it can no longer continue this, does that mean it is finally acknowledging it can’t print its way out of this problem?