In Obama’s $700 billion stimulus from 2009 there was an item in there designed to increase demand for housing, the underlying cause of the reason you’re unemployed, broke, or simply pissed your nest egg dropped to 50% of its value. Buyers of homes could get as much as $8000 in tax credits for making a purchase. I may have written about this (if you can find the link send it to me and I’ll link it up) but I might not have. At the time I thought this would have the effect of artificially raising the prices of homes by $8000. You can argue whether or not that was true. But I never believed it would stir up demand for housing. I figured people that were planning on buying homes would simply have an incentive to do so even more, the same way people took advantage of cash4clunkers.

I was wrong about demand. Demand for housing really did pick up. This can be measured in a number of ways, prices and volume being the favorites. The Case-Shiller Home Price Index is a good gauge of pricing. And prices were up across the board. The other way to watch the health of housing is in sales numbers. Aside from a precipitous fall around Christmas last year, sales have been increasing. Yesterday morning, people expected the sales numbers to go up again, but they went down.

This is not a good sign since the numbers were for the month of May, the credit didn’t expire until June, so a decrease in demand wasn’t expected yet. This means that for June no one will assume sales will increase. There’s no reason for them to. Consumer confidence is depressed, employment hasn’t changed, and now buyers lost their 8000 reasons to buy now instead of waiting for prices to fall further.

So the question of where housing prices go from here is obvious, they’re going down.

If you’re in the market for a house don’t let this knowledge deter you from pulling the trigger. Housing varies city to city. The latest data (for March, April is coming out next week) shows prices up in Cleveland, DC, and San Francisco but down in Las Vegas, Miami, and New-York. So make sure you check out prices in your city. Regardless of where housing prices are going, you shouldn’t try to time a purchase of a home any more than you’d time an investment. Buy a house you can afford at a fixed rate for 20-30 years.

Were I in the market for a house I’d go ahead and get in. Best case scenario would be I’d be shopping this time next year, and I suspect prices will be lower than they are now. But who knows, we might get another homebuyer credit. Only two things are certain, we’re far from out of the woods in this real estate crap & the economy isn’t getting back on its feet until housing has a foundation sitting on something other than sand.

Photo: respres

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categories: business, economics, government