Maybe.

There is no doubt that if the government plan leaked Wednesday night becomes reality it would spur some home buying and reduce some of the inventory that is hanging out there. However, the question is, would it also cause some unintentional consequences in the long term or the short term for that matter.

I always get a little nervous when the government tries to save us. I often compare government intervention to those wonder drugs that they advertise on TV. They have super happy people doing happy things under a great tag line while they monotonously insignificantly read off the side effects that are often more harmful then the original problem.

I understand that we are now in un-chartered territory and the consequences for doing nothing could be egregious as evidenced in the slow as molasses recovery of the Japanese economy when the government acted slowly but (need a breath in the middle of this sentence gone wild) I still think it would be a worthwhile pursuit to try and understand as many of the unintended results as possible.

One immediate effect is that, knowing that a 4.5% interest rate is on the horizon, some buyers may choose to wait and see whether or not it happens. I was speaking with a lender today who said that he was inundated with calls looking for a refinance at a 4.5% rate. As I understand it the plan would likely not include refinances which would create a market of mortgages with two rates and an industry that would be trying to find a work around. Even more troubling was that he said he received calls from buyers who were currently in contract to buy a house who wondered if they should breach the deal in order to wait for the 4.5% rate.

Longer term we may find people locked into their house because it has a lower rate, causing a firmly fixed inflexible real estate market. Or, we may find that we have again artificially inflated prices causing us to move a little farther down the road, the inevitable paying of the piper.

I am not pretentious enough to believe that I am able to see the end result of these actions and I am sure there are people smarter than me attempting to understand the ramifications, but I would definitely urge them to attempt to be exhaustive in their consideration of the effects.

That all being said if you are out there planning on buying your first home I don't think you can ask for much more. You get a Tax Credit, Tax deduction, possibly bond money, a chance to buy a home at depressed prices, a buyers market, and now possibly a 4.5% interest rate. Short of a fairy slipping the key to a home under your pillow while you sleep, I do not think you are going to get a better deal.

Hooray for 4.5%