Obama Throws in the Kitchen Sink

It's time for some straight talk on the President's housing plan that he announced to great fanfare today.

To put it in the simplest terms: it's not going to work.

Why do I say that? Prior record. I’ll show you the programs the government has already put in place to rescue housing, and their impact.

So far, President Obama has spent a total of $1.64 trillion to stabilize the housing market - enough for the Federal Government to buy nearly 10 million homes outright.

That's more than all the homes lost to foreclosure since the housing bubble burst.

Think about that: the government has spent enough money to buy nearly 10 million homes outright - more than all the homes lost to foreclosure in the past five years.

Here's what we got for that money:

That's a lot of your taxpayer dollars down the tube.

So let's look at the impact. Did this government spending fix the housing market or at least stabilize it?

Home prices in major markets are down 33% on average in major markets, according to Case Shiller Weiss.

Meanwhile the national median price has gone nowhere but down. Home sales are running at a rate of 4.6 million a year.

There were 7 million a year at the top of the market and a good market is considered 6 million in sales a year.

Foreclosures this year are expected to tally 1 million -- more than 2011.

The evidence is in and it’s not good.

The housing market is still going down, not up. Government programs have failed so to prescribe more of the same? Crazy.

I'll tell you what this document really is – it’s a campaign document. A lot of promises that are sure to go unfilled, but put into the marketplace to make people feel good.

There is one thing that would cure the housing market, and it doesn't involve bailouts -- and it's simple: jobs.

Regular incomes would allow Americans to buy homes and that would get the cycle started again.

Spending all this money isn't going to do it.

Where is the bottom for the housing market (in your neighborhood)?

You may have seen the recent headline that the housing downturn we are currently in is worse than the one experienced during the Great Depression. According to Case-Shiller data, prices have fallen some 33 percent since the market began its collapse, greater than the 31 percent fall that began in the late 1920s and culminated in the early 1930s. True enough, but the reality is this: Your community may or may not be in a double dip in home prices, cratering to the worse fall since the 1930s. I say that because, simply put, there's not just one real estate market. Every state, city and county can have different dynamics depending on local factors.

However, if you want to know the future of your own market - here's how to read the local tea leaves. First, check out your local employment picture. Are companies still in layoff mode? If people are still losing jobs it will be difficult for your housing market to recover. That's because people without jobs don't typically buy new homes. If there are consistently lots of ads in the paper for jobs and stories in your local newspaper about local employers expanding, your community may already be in recovery mode.

Time on market is another important consideration. The bust has meant that the inventory backlog has expanded as homes fail to sell. Currently, the national market is experiencing a nine months backlog of housing. More competition means lower prices and lower prices is bad for the market. If your town has inventory of just three to six months, your market may well be on the road to recovery. Scans local realtor websites or the local realtor's association website for details.

And, finally, check out the number of foreclosures going on in your city by going to RealtyTrac.com. Areas with high foreclosure rates - think Nevada where one in every 103 housing units received a foreclosure notice in May - will be the last to recover. And, remember - it's not a national market. While Nevada's foreclosure rate has skyrocketed, only 1 in every 9,589 housing units in North Dakota have received a foreclosure notice.

In truth, it's all relative. My home was built in 1933 - in the depths of Depression. You'd think nobody would have the capital to build. Clearly not true. There are exceptions to every rule - and may your neighborhood be one of them!

Surviving the double dip in housing prices

Take a close look at those housing numbers out today - and you'll begin to understand how deep the housing crisis really is. U.S. single-family home prices dropped in March to fall below the low hit in April 2009 - that was right smack dab in the middle of the financial crisis. In other words - as I've been saying - we really are facing a double dip in housing prices. The S&P/Case Shiller data released today tells the story: Its composite index of 20 cities declined two-tenths of a percent from February. The national index, the 20-city composite and 12 cities all hit new LOWS through March 2011. The national index fell 4.2 percent over the first quarter alone, and is down 5.1 percent compared to its year-ago level. For homeowners - a quarter of whom are already underwater - owing more than their home is worth - the news is not encouraging. And , it's clear that you won't be able to rely on any government programs to bail you out. The first-time homebuyer's tax credit is simply extending the pain of the downturn rather than fixing it; while President Obama's HAMP program has had precious little impact. The good news is that owners don't have to realize this loss unless they sell or need to refinance their mortgage. If you're in that position, you may well be able to hang tight until the market improves. In other words, you're going to have to survive on your own. My advice if you are waiting out this downturn: Don't overinvest in the house you are living in. If you're tempted to drop a lot of cash building an addition or a state of the art kitchen, don't even consider it unless the improvements are matched by your neighbors' homes. The last thing you want to own is the fanciest home in your neighborhood. You'll have a hard time reaping the benefits of that investment. If you can drop your costs by refinancing - 30-year fixed rates are at 4.5 percent for people with good credit - do it.

Housing: Don't believe the conventional wisdom

A growing number of us don't believe in the housing market anymore. And, it's not hard to understand why. Even after prices have fallen, many of us still can't afford a home. Others don't trust the market because of the crash in prices. As a result, we're grooming a generation of renters - people who simply don't believe the market will ever recover enough to make investing worthwhile. I disagree and I think that that kind of thinking is dangerous. That's because owning a home is essential to building wealth long term - the federal government gives one of its choicest tax writeoffs - the mortgage deduction -- to homeowners. What's more, the Federal Reserve has found that the largest store of cash for retirees isn't a 401(k) or a pension or savings - it's the value they've built up in their home. Look, clearly, confidence in the housing market is at an all-time low. Housing values have plummeted. But housing is just the latest in a series of economic bubbles that have popped - like tech stocks did more than a decade ago. I don't know if you've noticed - but tech stocks are back. LinkedIn, a dotcom that went public last week, is the hottest initial stock offering since 2006. Recently its shares traded at 22 times revenues, while rivals traded at just 9 times sales. And, in a similar, if not identical way, housing will come back too. The value of investments moves in cycles. To be sure, some of these cycles have experienced higher highs and lower lows than those in the past, but housing will come back and when it does, you'll want to own a home. Conventional wisdom is no basis for complex financial decisions - in fact, it's more likely to destroy your wealth than expand it.

Mortgage Fright!

Check out the story today in The New York Times on Fannie Mae and Freddie Mac. You can't miss it - it's on the front page. And, it's guaranteed to scare the living daylights out of anyone thinking about buying a home. The story says you can kiss your 30-year mortgage goodbye. The reason? The death of Fannie Mae and Freddie Mac, the mortgage giants at the center of the financial crisis. Both the administration and Republicans agree it's time for these two - propped up by $150 billion of our taxpayer dollars - to go. But the Times story maintains that mortgages will become more expensive - rates higher, fees out of sight. Look, just because lenders have been on the sidelines in the months following the financial crisis doesn't mean they always will be. When the cloud that is regulatory uncertainty passes and prices stop falling, I believe they will get back in and in a big way. The reality is this: We don't need Fan and Fred to oversee the housing market to boost home ownership. We have some of the lowest rates of home ownerships as it is among developed countries. Fan and Fred have bought us nothing but trouble.