Daniel Indiviglio - Daniel Indiviglio is a blogger and staff editor. Prior to joining The Atlantic, he wrote for Forbes. He also worked as an investment banker and a consultant.
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The government's attempt to boost home purchases through a broadened tax credit hasn't worked, according to Fannie Mae. In a new report (.pdf), the government-sponsored enterprise says that the housing rebound has been choppy and revised its projection of home sales growth for 2010 downward to 6% from the 9% forecast just last month. Fannie worries that home sales inventory is shrinking too slowly for a strong recovery to take hold.
Here's a graph the company provides to demonstrate the government credit's lackluster performance:
The report explains:
Fannie's 2010 home sales growth revision from 6% to 9% is also quite significant. It essentially cuts the number of additional sales expected compared to 2009 by 50%. That's a major change. From the narrative above, it sounds like economists underestimated foreclosures and credit difficulties that would persist in 2010, while overestimating the power of the credit.
So that big bump in home sales expected for March and April may not come to be. The home credit is having a weaker impact than anticipated. Fannie says even though homebuilding has been weak since the housing bubble burst, it needs to be even slower to allow the housing inventory to begin to decline to normal levels again. If foreclosures continue to break records as they did in March, then that also won't help matters.
The report makes pretty clear that the housing recovery will be a slow one.
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