The financial crisis is largely being blamed on the housing bubble that recently popped. Existing and New home sales had fallen considerably over the past year. Not till recently has there been a pause in the dramatic decline. This current pause has been largely attributed to the efforts of the US Government by supporting low mortgage rates and providing a home buyer tax break.
With foreclosures on the rise and property values around the USA still falling, what happens if the government runs out of political will and stops supporting the market?
Credit card rates have been steadily rising over the past few months as default rates have been gaining momentum. With very little political will for credit card debt, banks are forced to raise rates to help offset the rising risk. Over the same period of rising defaults there has also been a reduction in credit card use.
Without a doubt risk has increased on Mortgage financing. What happens when the US Government takes the “training wheels” off? Is the real estate market stabilizing or just reacting to short term government intervention?
