News Still Grim For The Housing Market

With the income tax credit due to expire and unemployment rising, the outlook for the housing market is grim.

We've had three straight months of stability of home prices and sales after two years of both dropping rapidly.

Home prices are still down dramatically from a year ago.

Millions of adjustable rate mortgages will ratchet up in their interest rates and monthly payments in the next three years. That is expected to add dramatically to foreclosures which in turn will reduce home prices.

The Washington Post says:

Economists cautioned, however, that the recent price stabilization is probably temporary. Rising unemployment will push more borrowers into foreclosure later this year, dumping more properties onto the market, they said. And the $8,000 tax credit for first-time home buyers generated temporary demand as buyers who otherwise might have waited to buy a house rushed to cash in before the credit vanished.

But when the credit expires Nov. 30, home sales are likely to wane, analysts said. And prices could fall another 5 to 8 percent before starting to stabilize again next year, they said. Industry lobbyists are pushing Congress to extend the credit.

When the credit expires, "demand will take a hit — home sales will drop — and house prices will resume their downward course, brought down by the weight of rising foreclosures and rising unemployment rates," Patrick Newport, an economist for IHS Global Insight, wrote in a research note.