That depends on the definition of a waste. Taxpayers’ trash is a bankster’s treasure. And for our govt’s key clients, the banksters, the “cash for shacks” handout has been a big success—which probably means Dodd and Frank will extend it. After shopping for some months in Phoenix (for a house to actually live in), we have been outbid on five offers so far and waved off on a dozen more (“don’t bother unless you’re bidding up 20%”). So, in PHoenix at least, speculators are back, helping to partly reflate the bubble, while also loading more dodgey loans onto the FHA (again). Also I think four consecutive months of data on house price increases support our anecdotal experience. So, bottom line, 5 out of 5 buyers got suckered into paying higher prices in “free-money” bidding frenzies as a gift to the banks.

Your larger point is dead on, of course, and we’ll stay on the sidelines again until the dead-cat-bounce settles down.

It is indeed a wasteful program. Those who can qualify and want to buy would have bought anyway. We are stealing future demand just to make the present look good. Housing prices have stabilized only because banks are holding the shadow inventory. Buyers are bidding up prices again just so they can close before the deadline to get the $8K. In the end, they are not really saving anything. In fact, they may even be paying more. Just like the clunkers program, the buyers would actually end up saving more if they buy in Nov-Dec this year when there will be a glut of cars on the lot again for sale.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aVyvAuFInq_Y

My guess is that there will be an upswing followed by another leg down in home prices into 2011-2012. The question is will it be a nominal decline or just a real decline through a pickup in inflation (and flat prices).