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Washington's New Housing Plan: Inflation

By Mark MacKenzie

Real Estate Broker/Owner

March 20, 2009 04:03 AM

If lower mortgage rates and first time home buyer tax credit's don't work, and they are showing they have not, it appears that Washington's backup plan for the housing market is inflation.

Between Obama's housing plan of $275 billion and now the Fed's recent move to purchase an additional $750 billion worth of mortgage backed securities on top of the $250 billion they agreed to purchase a couple of months ago, Washington has spent over $1 trillion on "housing" in just the past month. And that doesn't include $700 billion for TARP or Obama's $787 billion "stimulus" plan.

The end result of all of this is going to be inflation, and while inflation is a thief for savers, it is a blessing for those in debt or with mortgages. Inflation acts as a hidden tax on savings and a tax credit for those with debt. A dollar owed today will be worth less tomorrow. And speaking of which, doesn't the US government owe a lot of money to other countries?

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Lenn Harley

Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA

Real Estate Broker - Virginia & Maryland

I believe it's somewhere about $7Trillion???

Who's counting????

Mar 20, 2009 04:07 AM

Konnie Mac McCarthy

MacNificent Properties, LLC - Cobb Island, MD

Broker/Owner - VA & MD "Time To Get A Move On!"

I must admit... I for one can't count that high....and if I could... well...lets just say I prefer to be in denial.

Mar 20, 2009 04:10 AM

Li Read

Sea to Sky Premier Properties (Salt Spring) - Salt Spring Island, BC

Caring expertise...knowledge for you!

Mmmmm....interesting post. I've been waiting for inflation to be visible, since last October. It seems that it's the only result of all that's been going on, in the past months.

Mar 20, 2009 04:37 AM

John Mulkey

TheHousingGuru.com - Waleska, GA

Housing Guru

Throw in the latest Congressional Budget Office estimates that show the deficit almost $1 trillion higher than the original estimate, and I'd say that spells inflation. Just another sign that the government's strategy isn't going to take us where we want to go.

Mar 20, 2009 04:43 AM

Kathy Carson

Lynchburg eXp - Lynchburg, VA

Realtor, Lynchburg, VA, VA Homes - Lynchunberg,Bedford, Campbell

Did you watch Glenn Beck or hear him yesterday - scared the hell out of me! Good post! I'm going to bookmark and forward on.

Kathy Carson - RE/MAX - 1st Olympic - Lynchburg, VA

Mar 20, 2009 04:48 AM

Mark MacKenzie

Phoenix, AZ

Lenn: I am not sure anybody in Washington is counting, that is a problem.

Konnie: Don't be in denial, write your representative in Washington. :)

Sea to Sky: I would tend to agree with this. Inflation is certainly going to be one result we can count on and I am not convinced that Washington is opposed to this.

John: The more I think about this, I'm not sure that inflation is not what the current administration wants. It is easier to manage than deflation and it would certainly fit with their ideology.

Kathy: I do watch Glenn Beck from time to time, I like him. I did not see his show yesterday. What was it about?

Mar 20, 2009 04:59 AM

I just heard a news flash that the national deficit is projected to be $1Tillion each year for the next 10 years.

Eeeeeeekkkkk.

Inflation for sure unless we can get some serious economic growth and that won't happen until they get rid of negative equity for home owners so we can get back to buying and selling homes and fueling the American economy.

Mar 20, 2009 06:12 AM

Lenn,

That is an amazing number - the 10 years part.

The economy all comes back to housing and what they are doing for housing is not working. It's not just about affordability, it is about values too.

Mar 20, 2009 06:18 AM

Brian & Marie Spray

www.DFWAreaRealtors.com - Action Realty Group - Frisco, TX

Frisco TX Realtors

Mark - I might have missed something - the administration has done something for housing??

Brian.

Mar 20, 2009 06:29 AM

Terry Haugen STAGE it RIGHT! 321-956-2495

Stage it Right! - Melbourne, FL

Mark, we have a choice, inflation or deflation. Neither is good but inflation is certainly better than deflation.

Mar 20, 2009 10:18 AM

Mitchell J Hall

Manhattan, NY

Lic Associate RE Broker - Manhattan & Brooklyn

Mark, If nothing else buying real estate is a hedge against inflation. Hard assets like real estate tends to go up with inflation so buying real estate is insurance against a falling currency.

Because the underlying components of real estate rise with inflation the cost of replacing a home rises and with it the value of resale property.

Mar 20, 2009 11:47 PM

Kevin Robinson

Twin Falls, ID

Fractional Developer

I hope our illustrious leaders do not plan on solving our national debt problem with inflation.

Mar 21, 2009 01:33 AM

Brian: It is amazing how little you get for $275 billion today.

Terry: I am not sure if we have to make that choice. What we are doing today with this spending (yes both Dems, Republicans, and the Fed) is causing another problem for tomorrow. Simply throwing trillions at it does not necessarily solve anything.

Mitchell: I have been bearish on real estate for a while, I am begining to change my tone because of this spending.

Kevin: Bubble, burst, bubble, burst....

Mar 21, 2009 01:47 AM

We don't have a choice Mark, but the debt bush encumbered our generations with funding an ill gotten war, will probably never be calculated because the cost of military spending was left out of the annual spending bills, at his insistence.

Mar 21, 2009 01:50 PM

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