Is the Government About to Make Mortgage Market Even Worse?

   Ever read a really dumb headline and think to yourself, "Man, that is real dumb?" That's what I thought when I read CNBC's "Is the Government About to Make Mortgage Market Even Worse?" this morning. From the article:

   "Yes, refinancings-which have been running at around 80 percent of all mortgage applications-fell despite a new record low average rate on the 30-year fixed of 4.38 percent.

Not so good.

   But on the other hand, purchase applications rose 2.4 percent, largely driven by a 4.5 percent increase in government purchase applications (FHA).

Great, except for that last part.

    In other words, the government has been propping up a dead real estate market for a year and because they're going to stop propping up a corpse, they're to be blamed for making it "Even Worse?" I guess Uncle Sam's supposed to keep supporting real estate for the next decade until investors wade into the market again. I've stated before that real estate prices have to continue to drop to bring buyers back - prices have to drop to a level where the risk vs reward proposition makes sense. Propping up prices only delays the inevitable and prolongs the pain. 

   Government purchase applications have been driving the market for the past year, accounting for, at times, nearly half of all new loans. That may be about to change. New premium authority (translation: higher prices) goes into effect next week, on Oct. 4. New seller concessions policies are about to go into effect as well.

"These two policy changes will increase the opportunity for private capital to return to the market while improving the safety and soundness of FHA," FHA Commissioner David Stevens tells me. "