Will the Housing Market Dip Again Next Year?
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The news that home prices rose in August is not keeping Goldman Sachs from predicting that there will be a 10% dip in the housing market next year. Indeed, the current rise in home prices is likely due to increased demand spurred by the first time home buyer tax credit — which is about to expire. Here is what BloggingStocks reports about the likelihood of a housing market dip in 2010:
Alec Phillips, the head of Goldman’s Washington office, said, “The risk of renewed home price declines remains significant.” His “working assumption” is a drop of between 5% and 10% by the middle of next year.
Ethan Harris and Drew Matus from Merrill Lynch concur, writing “We should expect subdued home price appreciation over the next few years.”
Concerns about a second real estate collapse have been circulating recently in response to the expiration of the first time home buyer tax credit. The bottom line is that things have been improving, but many worry that without government incentives to prop up the housing market, the current improvements to the real estate picture will be unsustainable.
And there is a point to that argument. After all, the labor market has yet to improve markedly, and consumer confidence is down. Without consumers feeling confident to buy, and without employment numbers to support home purchases, demand is likely to slump once government help is withdrawn. And once demand slumps, home prices are likely to drop as well.
At this point, it is an interesting situation. There is little that can be done to truly prop up the housing market without making it totally dependent on the government. In order for the housing market to recover naturally, things need to take their course. However, the government doesn’t really want that (no matter the party in charge), because a long recession means fewer votes.
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October 28th, 2009 at 12:31 pm
[…] be a double dip recession, with another drop on its way. Indeed, some are speculating that the housing market could dip again next year as government aid is withdrawn and unemployment stubbornly refuses to improve. That could mean […]
November 12th, 2009 at 4:25 pm
[…] At any rate, there is optimism that slowing unemployment will help matters in the housing market, also leading to slowing foreclosures. And, as more people take advantage of government programs meant to help them afford their homes, there is a strong likelihood that they will not have to be subject to foreclosure. And that in turn may help keep the housing market from sliding back into another dip next year. […]