Economic Welfare Hurts Us All In The Long Run
December housing sales fell by 16.7 percent from November.
The sharp drop-off is attributed to the extension of the $8,000 tax credit for first-time home buyers to April 30. Suddenly, people weren't scrambling anymore to get in under the November 30 deadline.
A similar situation with car sales happened in September 2008. After the "Cash for Clunkers" (CARS) economic stimulus expired, car sales fell by over 10 percent.
I expect a pick-up in sales and home prices in the coming months, as the $8,000 tax credit expires April 30 and the Fed's $1.3 trillion purchase of mortgage-backed securities to prop up the housing market and keep interests low is expected to expire March 30.
After that, another big drop in sales, possible drops in prices and a rise in mortgage rates.
It is so frustrating to be saving money and making sacrifices... And see our politicians take us further into debt for misguided pork-laden spending, and our central bankers dilute the power of our earnings and savings through the spending of money generated from thin air - all to prop up housing prices, to modify loans to 2 percent in order to save the homes of irresponsible borrowers.
As I mentioned in my previous post, the government is currently behind about 90 percent of mortgages now. Banks are not lending their own money.
FHA is guaranteeing 30 percent of home loans (up from 3 percent a few years ago), and Fannie Mae and Freddie Mac are buying loans up to $750,000 from banks. If you're a first-time home buyer with a credit score of 580 or above, you are being paid to buy a house. It's a refundable tax credit. If you only owe $3,000 in Federal income taxes and you buy a house, you get $5,000 in a check mailed out to you! You can even put down the minimum 3.5 percent required by FHA through government-approved borrowing from a bank, based on your anticipated $8,000 tax credit.
While I'm all for unemployment benefits, they need to be moderate. Employers need to be charged mor, and states should be doing what California is currently doing: borrowing money from the Federal government to pay unemployment benefits.
Studies show most people on unemployment benefits find a job about 1 month before their benefits expire. During the time before that, they may or may not look for jobs, but the ones they find, they tend to pass up if it is not in a desirable field or at a desirable level of pay. So what do you think happens when people in hard-hit states with high levels of unemployment can extend benefits for up to 99 weeks of unemployment benefits?
Almost 12 million Americans are on unemployment now. Roughly half of them are on extended benefits. The jobs aren't coming back, folks.
By 2015, ONE THIRD of the Federal budget will be going towards paying INTEREST on debt.