The AP would love to cry wolf and say that because new home starts are down, that we are headed for another catastrophic downturn. I am not saying this is a certain untruth, but it is not necessarily accurate. Every fall the housing starts go down and as any real estate professional can tell you, from Halloween to New Years is almost a mandatory vacation.
The government has done what they do to stimulate the housing market, which was first to establish a home buyer tax credit, then to extend it to continue to stimulate the housing market. This did lift the housing market out of the slide it was in and actually allowed for seven percentage appreciation across the nation.
Most do not understand, but the implication of that are that Fanny Mae and Freddy Mac have “re-categorized” most every market in the nation to an appreciating market, from a depreciating market. This allows for Primary Mortgage Insurance which will allow banks to loan up to 100% loan to value, again. This will simplify more home buyers due to the fact that more home buyers can afford to buy with zero money down.
Although this is an unpopular practice in most circles, this will help the real estate market. Many people think we should return to the school of thought that says you save your money until you can put 20% down, and I agree with that. But, with the government declaring that the American Dream is not just for those who have the discipline and means to save, but to everyone, we have the position we are in now.
Until we get rid of the policies that force banks to use funny money principals that say it is OK to lend to unworthy recipients, do not be surprised to see home starts back up early next spring, and see a quick recover that may come as early as the summer of 2010.