I am worried about this spring. There are too many things happening all at once. Our nascent recovery is going to be put to the test, and it seems all too likely that it will be hobbled.

Why do I say that? Don’t I see that the Dow is well above 10,000? Haven’t I noticed that Bank of America trades at 16, and that the rate of increase in the national unemployment rate is leveling off?

Our economy is being driven by stimulus, and a few fumes.  Those fumes include the sudden demand among businesses to restock inventory.  That’s not enough, though. The real fuel comes from the forces of intervention.

Among the most important are the efforts by the Federal Reserve to restore some kind of liquidity to mortgage markets.  Last fall, amid all of the uproar over TARP, the Fed announced that it would buy $1.25 trillion in mortgages.  That is almost one-sixth of the national debt for mortgages in 2009.  Well, it was a nice party while it lasted.  All of that demand kept things stable.  It kept money going through the doors at (more…)

Just a list of a few things that are slowing up mortgage lending:

The first-time homebuyer tax credit:  The first-time homebuyer tax credit has been extended because it is a good thing.  It is getting all kinds of families into homeownership.  It is a classic demand-side strategy. After years of supply-side economics, isn’t it interesting to see how well demand-side policies can work? The homebuyer credit isn’t the only successful demand-side strategy.  Everyone was pretty happy with the cash-for-clunkers program, too.  Regardless, the homebuyer tax credit does come with some paperwork.  While it is bringing a lot of buyers to the table, banks are having to work through their applications on the credit.  A banker I spoke to today said this was the number one thing holding closings up.

Low appraisals:  Lenders can provide borrowers with conditional loan approvals, but until an appraisal comes (more…)