Tuesday, October 27, 2009
Home prices rise in major cities, but how long will it last?
By: Zachary Pienkowski
While many believe the outlook for the residential real estate market still looks bad, home prices continued to increase for the third straight month. Rising house prices are an important factor in rebuilding a stable economy, but it alone is not a good indication of the state of the housing market . Prices are at the highest they have been since August 2003, and yet on average are still more than 30% lower than the overinflated peak of May 2006. While it is a good thing that the home prices are increasing, there are some potential pitfalls that may drag them back down. The national unemployment rate is continuing to rise and the popular first time home buyer tax credit is coming to an end soon. This is expected to lower the demand for home buying and the unemployment rate continuing to rise will mean a larger number of foreclosures due to Americans being unable to pay their mortgages. The track record for rising home prices is not long enough to make economists confident, however they have said that if prices continue to increase during the winter months that would be a very encouraging sign for the long-term outlook. In order to keep the demand for home buying up Congress is working on a plan to to extend the tax credit program and eventually phase it out within the next year. That would allow for at least a solid year of home purchasing and hopefully increasing prices as well.