The following is an article from Cars.com posted January 22, 2010.  (direct link)

Clunkers Quotient: Some Regrets, Late Payments

Higher credit risk buyers who bought a car using the Cash for Clunkers incentive last year have higher repossession and late payment rates and higher levels of buyer's remorse than buyers who did not use the program, according to CNW Research.

Those in the lowest credit category had a 4.8% repossession rate compared with those who bought similar vehicles without using Cash for Clunkers, which stands at only 2.2%. CNW could not discern if buyers in higher credit categories also have higher repossession or late payment rates.

When it comes to regretting a purchase, one in five who used the government’s $4,500 incentive said they now wish they hadn’t. The buyer's remorse rate for non-Clunkers buyers was one in 20.

It makes sense that more subprime borrowers would have difficulty making their payments. The regret could also be attributed to people who bought vehicles but have yet to see better jobs or wages materialize in a still-sluggish economy.
 

Dismal Reality

When individuals are paid by the Government to buy things, bad consumption decisions are made.  When prices are distorted by politicians, inefficient outcomes always result.  People who would not otherwise have purchased a car or home do so because of the perception of "free money" or a "one-time bargain". 

A similar phenomenon is assuredly occurring within the housing market.  First-time homebuyers who were enticed to purchase overvalued houses with the Government's $8,000 tax credit will default in higher numbers and experience buyer's remorse as falling prices overwhelm the benefit of Congressional subsidies.

Cash-For-Clunkers was a disaster which cost tax payers $24,000 per incremental car sale and produced the negative distortions highlighted in the article above.  "Cash-For-Condos" combined with Fed subsidized mortgage interest rates, and 3.5% down payment FHA loans will have a much worse effect.  Buyer's regret will certainly surpass that created by Cash-for-Clunkers as houses are more expensive, overvalued, purchased in highly leveraged transactions and rapidly declining in price.  As scant equity evaporates and mortgages sink further underwater this regret will transform itself into an incremental stream of Government created defaults and foreclosures.  As has been stated on this blog since October 2nd of 2008:  
 
"Any action (by the Government) which would attempt or have the effect to prop up housing prices at an artificial value is counterproductive.  Such initiatives will only lengthen, deepen and increase the damage caused by the inevitable march to a sustainable (price) equilibrium." (link)