Wednesday, May 12, 2010

Home prices could sink without tax credit?

Home prices are widely expected to fall now that a tax credit for home buyers has expired.

That's raising concern about a possible double dip in home prices.

National housing prices stopped falling early last year and rose 0.3% over the 12 months ending in February, according to a study by real estate analytics firm CoreLogic.

The firm predicts prices will fall this year before starting to rise again in late 2010. Even so, next February's prices are likely to be 4.2% lower, it forecasts.

No one should be surprised if the pool of home buyers shrinks after the tax credit expires.

Whenever we artificially stimulate demand by extending government subsidies, the artificial demand disappears after the subsidies expire.

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