Home sales data. Are prices on the rise? It here to stay?

Published by admin on December 23,2009

An article on the front page of today’s Wall Street Journal entitled “Home Sales, Prices Brighten” attempted to share some positive news regarding the US housing market.

The median home price in the US as reported by the National Association of Realtors is up to $172,600 - this is the first increase since June.

This sunny news is underscored by the fact that there are rumors of a “new wave of foreclosures” that are said to be going to hit the market at some point in the future and the fact that billions in government aid have already been burned.

Things that are still unknown before we can say we are out of the woods completely:

  1. How much of the sales increases are caused by the first time home buyers tax credit that has been extended and expanded? More information on this can be found here. Can the market stand on it’s own two feet without federal tax incentives?
  2. The quantity of foreclosures that are expected to hit the market in 2010. Will foreclosure levels continue to rise?
  3. The biggest elephant in the room - high unemployment rates. How can demand increase if people don’t have jobs?
  4. Although Federal Reserve chairman Bernanke has said that the recession is “likely over” will the economy weaken further? If it does more foreclosures would hit the market. This would increase supply levels and place downward pressure on prices.
  5. What is going to happen to FHA? FHA allows buyers to buy homes with low down payments and makes home ownership possible to people with only 3.5% down. This down payment is likely going to have to increase due to dwindling reserves at FHA. If the requirements become more stringent, buyers may be locked out of the market which could affect demand levels.

All in all only time will tell.

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