Oh Yeah, Real Estate's Booming Again!

So, October new home sales climbed more than expected in November, and mortgage rates are once again at historic lows.  Let's break out the champagne!

Or not.  First, the increase was still pretty pathetic when compared to a healthy market.  Second, the banks are getting money at effectively 0% from the Fed, which means there is upside to any mortgage rate they use; too bad the Fed can't keep it going, so that bit of rocket fuel is bound to go away.  And third, the entire increase can be attributed to buyers rushing to lock in the tax credit or to funds making bulk purchases of vacant new construction.  The former is unsustainable, and the latter just means there will be case lot sales of houses come Spring as the funds try to flip and take their profits, which means the market will be driven down just as people start to list their houses for the peak season.

A Back Door Hit to Affordable Housing

Let's face it, affordable housing is expensive. For developers and lenders, that is. The margin simply isn't there, so affordable housing wouldn't get built without incentives to give it a boost. The biggest boost has been tax credits and deductions. The problem is that credits are valuable only if there are taxes to credit against, and deductions valuable only if there are profits to deduct from. As you may have noticed, profits have been a little thin on the ground for developers and lenders lately. Consequently, they're abandoning affordable housing projects they only got into for the tax breaks. So not only has the credit crunch taken a significant percentage of the population out of the purchasing market, and not only are rents shooting up because of the sudden increase in demand, but the affordable housing in the pipeline is contracting. That means the affordable housing run-out from this downturn will be with us for several years at least.

Hey, maybe they can take the dark space in the malls and convert it to housing units.