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Three Reasons the Housing Market Will Recover - 2010-05-02
THREE REASONS THE HOUSING MARKET WILL RECOVER

Now that the federal Home Buyer's Tax Credit has, in fact, expired, many thought that homebuying activities would dry up. Unlike last winter, the credit has neither been expanded nor extended, and industry watchers have worried that home prices might see a "double dip" without the stimulative effect of the money.

There's no denying that the program has been successful. Literally millions of Americans have taken advantage of the opportunity to pick up quick cash and grab a bargain house at the same time. But the free lunch has ended, and reality is staring us right in the face. Where will the Atlanta housing market head from here?

I predict a continued slow recovery in prices and activity, and I have three reasons for believing it.

1.  The overall economy is improving. Slowly but surely, people are feeling a little better about their own financial situation, and that translates directly into spending. The more spending that occurs, the better the economy. The better the economy, the more jobs that are created. The more jobs that are out there, the more houses that sell.

That's an oversimplification of an extremely complex situation, and we still have a long way to go, but things are definitely better than they were a year ago, and most believe better times are ahead.

2.  Interest rates are still extremely attractive. And I'm not talking about some weird adjustable rate instrument that is tied to an offering of inter-bank rates in London. I'm referring to the all-American thirty year fixed rate loan that our parents had on the house in which we grew up.

Most Americans are firmly convinced that a single-family house in a good neighborhood in a growing community is a solid investment, and they are right. And if you can lock in a good price with a low fixed interest rate, you add strength to your financial position by being able to predict your housing expense into the future.

With thirty year money in metro Atlanta easily available in the low five percent range, no one can complain that overall housing expenses are excessive.

3.  And what about the loss of the tax credit? I don't think it will matter.

The housing market in our metro is still soft enough to absorb the financial hit. By that I mean a savvy shopper who isn't afraid to negotiate can expect to buy a house in this market at enough of a discount to offset the lost tax credit.

Sellers are painfully aware that price sells houses, and I expect builders to offer their own version of a "home buyer's discount" as a way to incentivize the homebuying public. Owners of resale homes will follow suit.

Is that a cheap and crass marketing gimmick designed to fool the public into thinking they are getting a benefit that they truly are not receiving?  Yes.

Will it work? Yes.
 
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