Real Estate – The Fiscal Cliff

Real Estate Outlook: The Fiscal Cliff

By Broderick
Perkins

December 10,
2012

The strongest housing
market since the peak of the housing boom is expected to pick up steam, but the
so-called “fiscal cliff” could cause problems.

Fiserv Case-Shiller’s
Home Price Index projects home prices nationwide will increase by an average of
only 0.3 percent from the second quarter in 2012 to the second quarter of 2013.

However, by the
second quarter of 2017, home prices will be moving up at an annualized rate of
3.3 percent. Home prices in 37 of the 384 metro areas are projected to increase
at more than twice the nationwide annualized rate of 3.3 percent over the next
five years. More than half these markets are in three states: California,
Florida and Oregon.

The lackluster 0.3
percent home price growth is based on Congress failing to prevent the nation
from falling off a fiscal cliff. The so-called fiscal cliff is a reference to
recession-like economic conditions expected without the extension of tax cuts
and Congressional action on other economic stimuli.

If Congress can’t
come to an agreement, households stand to pay, on average, an additional $2,200
a year in extra taxes. Taxpayers will feel the squeeze in their first 2013
paycheck. With more money going to taxes, Americans will have less money to
spend on housing and that could stall the housing recovery.

Meanwhile, Fiserv’s
analysis of home price trends in more than 380 markets found that the average
home price rose 1.2 percent for the year ending in the second quarter 2012.
That increase marked the first year-over-year increase in home prices
nationwide since 2006, excluding 2010. The 2010 market enjoyed the benefits of
the federal home buyer’s, tax credit.

Prices were up in the
majority of the metro areas tracked. Leading the way were home prices in Phoenix,
Arizona, up 14.5 percent; Detroit, Michigan, up 11.6 percent; San Jose,
California, up 9 percent and Miami, Florida, where prices rose 6.9 percent.

Even if the nation
avoids falling off a fiscal cliff, Fiserv expects a small “hiccup” to
slow the housing recovery. David Stiff, Fiserv’s chief economist said, “In
some markets, investor demand for housing will start to fade before first-time
and trade-up buyer demand has ramped up enough to take its place. This will be
most evident in markets with large foreclosure inventories.”

“In some
markets, investor demand for housing will start to fade before first-time and
trade-up buyer demand has ramped up enough to take its place. This will be most
evident in markets with large foreclosure inventories,” Stiff also said.

Fiserv also reported,
of the 29 markets where home prices remain more than 50 percent below peak
prices, 15 are in California and 11 in Florida.

However, over the
next five years, home prices in 24 of these 29 markets should increase at
higher rate than the projected annualized rate for the nation as a whole.

Source: Realty Times

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