Housing Status - An Excellent Overview

http://seekingalpha.com/article/168311-the-housing-tax-credit-maintaining-a-market-on-the-brink

This article is an excellent overview of the housing industry and it's current status. As you know, there has been positive sales reports of existing homes. Let me outline several thoughts concerning the surge in sales.
1. During stable economic times, builders would raise prices on the new homes in a subdivision because they could and more importantly to create a sense of urgency for the buyer. With prices rising, the buyer needed to get off the fence and make a decision. Buy now or buy at a higher price.
2. This is the same for interest rates. When interest rates start to climb, there is always a surge in home buying. Buyers have to make that decision to buy now or use their crystal ball and guess what interest rates will do.
3. We now have the $8,000 federal housing tax credit expiring at the end of November. If a first time home buyer is not under contract now, they may not close in time to receive the tax credit. Thus, there has been a surge in sales for first time home buyers.

Historically, interest rates should be around 8%. Currently interest rates are below 6% and have been for a long time.

So ...... if prices are dropping and not increasing. Inventories continue to increase. And interest rates are at historic lows, the main reason for the surge in home sales is the tax credit will soon expire. A reason for first time home buyers to buy. Now the rest of the story......

The 3rd quarter was the worst quarter on record for foreclosures.
Housing starts are bouncing along the bottom and at historic lows. See the graph above.
The economy will not recover without the consumer buying anything including homes. And the consumer will not be spending if they don't have a steady income. Jobs, Jobs, Jobs are needed.
Also, the extension of the housing tax credit is needed to sustain sales and create jobs.