[quote=briansd1]Intervention is designed to stop prices from collapsing further than they already have, encouraging people to stay put.
Remember, because of loss aversion, homeowners will willingly sell only after prices return being above mortgage balances (above water) + cash sunk (downpayment, remodel).
Theoretically, as prices firm up and become organically sustainable, government intervention will be withdrawn, thereby creating a drag on the market, but not enough of a drag to reverse previous gains.
We may question Federal intervention being withdrawn; but Federal Reserve intervention will eventually be reversed.
There are different forces at play. There is pent-up demand, but there is also pent-up supply.
I believe that interests also affect affordability.[/quote]
And yet, prices collapsed anyways. How much more would it collapse w/out government intervention, no one really knows. But you’re giving government too much credit for knowing exactly when to pull out, so only to stop the prices from collapsing instead of aiding the price increase as well. I say, the intervention will cause price to increase. Which will encourage people to move.
