Some would say September 7, 2008 will be marked as one of the "Biggest Government Bail Out's" in American history. There are plenty of articles out there talking about what has happened and what will happen to Fannie Mae and Freddie Mac to shore up the stability of the housing market. The question that comes to mind is how is that going to affect the consumer in the short run and down the road?
Short Run:
- Lower interest rates
- Consumer Confidence
The government take over of the organizations has already helped increase confidence. We have seen the stock market strengthen and interest rates have dropped slightly. The price of Oil has dropped and the Dollar has gained. These are the short term results we would hope for. The housing market in the Atlanta area will continue to be a "buyers market". Seller's who are upgrading will lose a fraction on the sale of their current home but gain equity in their purchase.
Long Run:
- Reduce Inventory
- Higher Fees to Consumer
Inventory will decrease and the market should level off. How long this will take greatly depends on the confidence wave created by the take over. The great Atlanta area still has over 12 months of inventory that needs to be depleted before sellers can "feel" like it is a good market again. Paying off the brunt of the debt will carried by the consumers who are getting new loans.
One quote from Paulson caught my eye:
"A failure would affect the ability of Americans to get home loans, auto loans and other consumer credit and business finance. And a failure would be harmful to economic growth and job creation," Treasury Secretary Henry Paulson.
Has the government just created a bigger bubble that can burst down the road?
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