Housing Incentives

This article goes over the issue of housing prices in Utah. It talks about how rates were much higher in October and how they have seemed to drop a little bit since then. It brings up the question of whether or not the housing market will be able to sustain itself, or if it is only working efficiently now that the government has intervened? After all, it is quite the incentive to go and purchase a house when the government has extended their 8,000 dollar tax incentive for first time buyers when it was supposed to end Nov 30th. Not only was there this incentive, but there is the incentive of decreased prices (9% median sales price decline), as well as lower mortgage rates. Realtor/ Broker Ryan Kirkham said, “…it was just too much for people to ignore.” This now brings up the question: Are these incentives good or bad for the future of house buyers/owners?
At first of course, the price decrease and lowered mortgage rates are good for consumers because it allows more people to be able to purchase a home they can afford. With decreased prices, the demand for the housing market will increase, which will potentially cause prices to go back up! The only thing is that the government keeps pushing back the deadline for their tax incentive. This is keeping prices down for now, but what will happen once the federal government decides to stop intervening?
This government imposed price ceiling is keeping prices low for the meantime, true, but will it not be worse for people in the near future? The question of the housing market being able to sustain itself after the federal government stops intervening, still remains. I can’t help but feel a sense of depression once the government removes its price ceiling. I’m sure that the prices will go up, pushing the demand for the housing market back down, which will eventually push people back away from Utah, leaving our economic situation back where we were in October. This being said, I still believe that the market will, in time, correct itself eventually, pushing prices back towards equilibrium. It is hard to see if the market will be able to self sustain itself, when the government keeps imposing itself.
What will happen now that the government has extended their deadline? Realtor Kirkham thinks that it will be good for potential buyers, if they don’t wait! He thinks that it would be better for people to take advantage of the deal now while they can, before interest rates start to spike, which is the path that this extended deadline is headed towards. He remarks on how the market for housing prices will react when the economy improves. He states that with an improved economy interest and mortgage rates will increase, so it probably won’t be worth anything to wait until this happens.
Overall, these questions of whether or not the governments incentives help consumers are almost irrelevant when it comes to looking at the market for housing prices to see if it will be able to self sustain. Like the chief economist with real estate information company First American Core Logic said… “Its really hard to tell.” Its hard to tell because the government is imposing. Like Adam Smith said, perfect competition can only exist when the government does not intervene! I have a good feeling that although this government intervention may be good in the short run, it could greatly weaken and damage the market in the long run. Once the government stops intervening, is when we can truly see if the market for housing will be able to self sustain itself, which I am fairly confident that it will (going off of Adam Smith’s ideals).