Recent buying activity in housing and an improving economy have lulled some Sellers into a false sense of security. Although there are many signs of a better market ahead, Sellers are advised to be skeptical as they consider Buyer Offers. An increase in pending sales, a reduction in unemployment, and the improvement in the Stock Market, have led many speculators to report that the bottom of housing market prices, has been reached, the road ahead is still likely to be very bumpy for Sellers. Consider the following:
In an unprecedented move of actively raising their lending rate, the European Central Bank, along with the rest of the world has shunned Fed Policy in the United States. The world believes that the United States Policy of keeping rates artificially low and aggressively printing and spending money to stimulate the U.S. economy, while ignoring the risk of inflation, is misguided.
Treasury Secretary Ben Bernanke and Fed Reserve Chairman Timothy Geithner have made no bones about their willingness to pull out all the stops to keep the economic recovery moving. Are they right and the whole world wrong?
It won’t take long to find out the answer. The second wave of stimulus spending which added another $600 billion to the U.S. deficit, is set to end in early June. After that, the U.S. economy will have to stand on it’s own two feet. The big question, how will it fare?
Standard and Poor’s have already put the U.S. Debit issues on a watch list, because of the impact excessive spending could have on the ability of the government to pay it’s debt. Although Treasury Returns have increased slightly, Treasury Notes are still considered to be one of the safest investments in the world. But, in order to avoid running out of money, Congress must increase the allowable Federal Deficit Ceiling of $14.3 Trillion. This is a hotly debated issue in Congress and could lead to even greater concern about the cost of funding the debt in the future. If ratings on U.S. debts drop, the cost to borrow increases for the Government, leading to higher interest rates and inflation.
So, has U.S. Policy led to an artificial economic bubble? If so, U.S. residents can expect another drag on the economic recovery, with higher home mortgage interest rates and higher inflation.
Higher rates mean that fewer buyers will be able to afford homes. This could seriously dampen the modest economic gains we’ve experienced, causing even more downward pressure on housing prices.
Anyone Considering selling a home should consider the above issues and their long-term impact on future housing prices. Could prices drop even lower? We’re not out of the woods just yet.