Moving demand around to temporarily increase home prices
Posted by nithi.vivatrat on August 26, 2009
As has been broadly reported, the S&P/Case-Shiller U.S. national home price index rose nearly 3% in the second quarter compared with the first three months of this year. In the Washington region, prices of previously owned single-family homes rose 2.85% in June over the previous month, the second gain in a row after a 1.3% increase in May.
I wrote previously that we’re still facing further unemployment and foreclosure activity, as well as the end of the first-time buyer tax credit; all of these factors have the potential to take away the gains we are seeing. Specifically to the tax credit issue, Dean Baker, the co-director of the Center for Economic and Policy Research, stated in the LA Times that the tax credit “probably pulled a lot of purchases forward that might not have happened until 2010 or 2011, and that demand’s not going to be there.”
We’ll need to wait until after the tax credit program expires before we can really get a sense of how prices will trend in the “normal state.”