(James Saft is a Reuters columnist. The opinions expressed are his own)
All the King’s horses and all the King’s men have been busy propping up the housing market but sometime this year, perhaps soon, it will face a Humpty Dumpty moment.
While it gets a lot less attention than the banking bailout, the official forces targeted at supporting house prices are truly vast; a generous tax break for buyers and a mortgage market that has essentially been nationalized.
That’s bought a recovery of sorts — Standard & Poor’s/Case-Shiller home-price index released on Tuesday showed that in 20 major cities home prices rose 0.2 percent on a seasonally adjusted basis between October and November, despite a national unemployment rate of 10 percent and a slow-motion cascade of foreclosures.
But like the egg in the nursery rhyme, which once broken cannot be reassembled, housing still faces some pretty horrendous fundamentals. It needs a strong recovery in employment to arrive before political consensus for housing support cools. (Full disclosure: I just bought a house, but hey, everybody’s got to live somewhere).
Already there are signs that housing may be faltering. Existing home sales declined sharply in December, though this was partly because many rushed to close purchases before a now extended deadline for tax rebates expired on Dec. 1.