"Ugh!" is the first line of an e-mail I got from Anthony Sanders, professor of real estate and finance at George Mason University. He's talking about mortgage purchase applications, which have fallen to puny levels last seen in December 1996.
"The Obama tax credit caused a blip in home purchases, but it seemed to simply sap applications from the future. But lower interest rates aren't helping home sales or loan applications. This does not bode well for the housing market … or Fannie and Freddie losses.
"But look at the decline in purchase loan applications AFTER April 30 when the tax credit program expired. (They've fallen by almost half.)
"The general declining interest rates have been a generator of mortgage refis. But that is about all the action the government can generate -- refinancing.
"Perhaps the new slogan for Fannie, Freddie and the FHA should be 'Making Loan Refinancing Affordable.' Since they don't seem to be helping the housing market in terms of home sales."
I pointed out this phenomenon in today's mortgage analysis, too. Now, when you read the above, it sounds like Sanders believes that the slow pace of home sales is a bad thing, and that it's Washington's fault. But that isn't what he means.
The mistake, according to Sanders, was trying to stimulate home sales with the tax credit. He's not criticizing the Obama administration for the depressed level of home sales, he's criticizing the administration for trying to manipulate home sales in the first place.
The other day I asked Sanders if we should get rid of the home interest tax deduction. "Of course! Don't be silly," he said. "It so overly skews housing investment toward owner-occupied. ... There's only so much capital in the United States and the world, and if we just keep promoting homeownership, we skew capital into housing. We could have used that capital for other uses."