Looks like round three of government intervention in the housing market is about to kick off. Apparently, the powers that be believe getting struggling home owners who can’t pay their mortgage out of their homes (simultaneously saving their credit report) and selling those properties to well qualified buyers, via the short sale process, will prop up home prices.

Of course, the big picture behind this type of move is pretty simple:

1. Prevent further deflation in the real estate market.
2. Prevent further writing down of bank owned assets.
3. The banks get paying customers living in those homes.
4. Banks get a little something for the effort to push paper a little faster.
5. Homeowners who pay their mortgages also pay their taxes (e.g. tax revenues go up).

So the take home message (my completely non-professional opinion only) is:

1. Don’t expect mortgage rates to jump above 6% anytime soon. The government simply can’t take the hit.
2. An expedited and incentive based program will speed up the short sale process, but I wouldn’t expect home sales to jump substantially.
3. Getting approved as the buyer of a short sale will be just as difficult as it is now because the same gate keepers are still in charge. Meaning, the banks must still approve the write down of the original mortgage, and approve the buyer for the mortgage.
4. If you’re a real estate investor, there will likely be plenty of time to sort through the plethora of bargains still on the market. You may not have the pick of the litter, but there is still a lot of inventory to choose from.

When you consider just how high the spike in the real estate bubble really was, I’m not sure anything can prop up the housing market… except lower prices.

Thoughts?