What happens after the tax credit goes away? Is the housing market toast in the second half of the year?
In the immediate months after the tax credit deadline, home sales will fall notably. The rush of buyers to meet the deadline will have left very few in the pipeline. The more interesting question is what happens in the several months after the tax credit deadline, say from October and onwards. The housing recovery will depend heavily on jobs and on whether consumers have regained their confidence about home buying. Job creation naturally brings housing demand. In addition, if the home values have definitively stabilized or even show some modest increases then the many people who have been on the sideline waiting for the bottom will no longer have any further reasons to wait. According to my estimations, there appear to be more than a usual number of renters with the necessary finances to buy a home, but have chosen not to because they did not want to purchase a depreciating asset. This suggests a bottleneck in pent-up demand. If home prices show several consecutive months of stability,
