According to this Real Estate Economy Watch article, Recovery Softens as More Markets End Year with Annual Price Decline, the government sponsored artificial housing market recovery has already begun to sputter. Despite the NAR's (National Association of REALTORS) reports earlier in the year that the housing market was recovering, the latest reports show the opposite. This should be no surprise since the government efforts to "save" the housing markets are largely the same policies that caused the housing bubble and crash. The government has used the following strategies to try and inflate housing prices:
- Lender of Last Resort - The government is not responsible for over 90% of all the residential mortgage loans in the United States. Since there is basically no private mortgage market this method should be re-worded as the "Lender of Only Resort". The government has accomplished this by a massive expansion of FHA insured mortgage loans (despite record FHA loan defaults - see FHA In Financial Trouble: Bailout Likely), continued mortgage buying by Fannie Mae and Freddie Mac (despite the fact that Fannie and Freddie are bankrupt), VA guaranteed mortgage loans, USDA Rural Housing mortgage loans and more.
- Withholding of Foreclosures and Shadow Inventory - Since the FHA, Fannie Mae and Freddie Mac collectively control a large majority of residential mortgage loans they are able (and apparently very willing) to hold back foreclosures and soon to be foreclosures from hitting the market. Therefore, inventory is artificially restricted, which (if you remember Economics 101) means prices go up.
- Letting Banks Cook Their Books - The government has basically let banks pretend that they are in much better financial condition than they actually are via loosening accounting rules. The accounting rule changes allow the banks to sit on a mountain of foreclosures and soon to be foreclosures and pretend that they don't exist. Without these accounting rule changes the banks would have to sell these properties much faster, which would increase the supply of houses and, therefore, housing prices would come down.