One of the biggest near-term questions facing this housing market is what will happen when the current stimulus helping to add some stability in this market goes away. Two of these components are government-driven, with the last being more market driven. Together, they have the opportunity to influence the demand, cost and confidence levers driving housing prices.
- First time home-buyer tax credit – demand lever: The $8k tax credit is set to expire April 30, 2010. While clearly more meaningful in the less expensive housing markets outside of NYC, it will be interesting to see 1) if it will be extended, and 2) the macro impact that it might have on the general health of real estate nation-wide.
- The Fed’s MBS purchase program – cost lever: The Fed will cease its Mortgage Backed Security purchases by the end of March, promising to not begin re-selling them for some time to come. Estimates of potential interest rate impacts range from .25% – 1.50%. The ultimate significance of this shift will likely be determined over the coming two quarters.
- The stock markets – confidence lever: The stock markets have certainly played a role in increasing the wealth effect for both buyers and sellers, alike. The question is, has performance outpaced the fundamentals or is it truly a leading indicator of better economic times to come?
For those of you waiting on the sidelines, make sure to watch these three stimuli to guide your analysis.
