Government’s Housing Subsidy Program’s Ramifications

In a surprising twist of events, people who cannot afford expensive houses still do not have the money to pay them off.

As many economists predicted, the government’s mortgage subsidy program has simply delayed the inevitable. Now that the program has run out of money, homebuilders believe they will not be able to contribute to the economic recovery.

According to an Associated Press article, applications for building permits fell in May in spite of “promising economic data.” I believe this lapse in home construction is tied to the government’s now defunct mortgage-subsidy program. The same article states, “Homebuilders are feeling less confident in the recovery now that government incentives for buyers have expired.”

The tax credits on mortgages and home-building was simply adding fuel to the economic decline. In certain cases, it might allow those people who have fallen on hard times to pay off their houses, but in many other cases, it simply reinforces spending beyond peoples’ means. In other words, some people might have been encouraged by the program to buy houses, and once the subsidy ran dry, they still could not afford the houses.

The result? A longer-drawn out decrease in housing sales.

Specifically speaking, the subsidy kept the high-end housing market artificially high while the low-end and mid-end markets suffered from the economy. If you’ll recall, those markets, thanks to Fannie Mae and Freddie Mac, were some of the direct causes of the economic recession. Now that the subsidies have worn off, the high-end market is taking a dive.

While the numbers are not nearly as bleak as they were several years ago, they are still not where construction workers would like them to be. The article points out that house-building is a crux on the economy. Each house guarantees at least three jobs per year and provides a lot of money to state and federal governments. On top of that, the housing market creates dependencies to other markets, such as the home appliance industry and even lumber yards. With the housing market taking another sustained drop, it may be possible that the economy will face a double-dip recession, but economists remain optimistic.

Chris Buchheit

Chris Buchheit

Chris Buchheit was born under the hot Floridian sun during some year in the 1980s. There he studied school matters until moving to North Carolina in 1999. Possibly due to the fact that his mom had enough of him being inside all the time, he quickly got involved in community affairs via the Boy Scouts of America, where he learned the values of citizenship, morality, duty to God and country, and that the biggest kids get to boss around the smaller ones. Chris attained the rank of Eagle Scout in 2004, and still values the rank as one of his proudest achievements. Beginning in 2006, Chris began attending the University of North Carolina at Chapel Hill, where he quickly learned the value of basketball and poplar trees. Since attending UNC, Chris has been double majoring in Asian Studies, with a concentration in Chinese, and Political Science. When he isn’t slaving over his honors thesis, looking up a bunch of Chinese Characters, volunteering, or mindlessly browsing the same websites over and over, Chris enjoys writing short stories and novels. Much to his roommates’ annoyance, he also spends his free time learning to play the guitar. Above all else, though, Chris values God, his family, and his friends. For the future, Chris plans to apply to Georgetown to further his studies in Political Science, hopefully with a concentration on China. Pending acceptance into Georgetown, Chris would like to study while gaining professional experience in a government job in Washington DC.
Chris Buchheit

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