While some experts have declared an end to the housing plunge and recession, Yale economics professor Robert Shiller isn’t so sure.
“The question is whether we have a strong recovery or something like a double dip,” he says. A double dip recession is when GDP returns to negative after a couple of quarters of growth.
“I don’t know if it will be a double dip. But it could be weak performance in the real estate market and in the overall economy.”
That’s what happened in the 1991 recession, Shiller points out.
The "kind of iffy" housing market could find a new bottom, he says. “That’s definitely within the realm of possibility,” he told CNBC.
Already home prices have dropped on a non-seasonally adjusted basis for five straight months, according to the Case-Shiller/S&P Index co-founded by the Yale professor.
The 9.7 percent unemployment rate isn’t exactly helping the economy out either.
“That’s what I worry will distinguish this recession from others. It’s generating a lot of anger and anxiety – anger at Wall Street,” Shiller noted.
That’s a repeat of the Great Depression, he explains.
“The business community then complained that the government was changing the rules on them, that there was fundamental uncertainty,” Shiller said.
“They said that they couldn’t do business going forward. We’re in a little bit of that now too.”
As for the housing market, it will have to figure out ways to adjust to the scheduled end of the homebuyer tax credit. That gave first-time home purchasers an $8,000 jump on their taxes, if they sign a contract by the end of Friday and close the sale by June 30.
But, “It will not be extended,” Lucien Slavant of the National Association of Realtors, told CNBC. He’s unaware of any push in Congress to continue the benefit.
So now real estate firms are urging home sellers to replace the tax benefit with one of their own – price reductions. And some developers are offering price cuts to buyers of their new properties.
“In a way, it’s marketing the property,” Gloria Marina, an agent at Florida-based real estate firm Esslinger Wooten Maxwell, told CNBC.
She recently convinced a seller to offer an $8,000 refund on a $269,000 home in the Miami area.
“The usual way you motivate people to buy is to drop prices, but this house is already well priced.”
Congress included the temporary tax credit in the $787 billion stimulus package signed into law a month after President Barack Obama took office last year. The idea was to bring the housing market back to life. Lawmakers, after intense lobbying from the real estate industry, agreed last fall to extend it until April 30.
Nearly 1.8 million households had used the credit as of mid-February at a cost of $12.6 billion, according to the Internal Revenue Service.
The government is offering buyers who haven't owned a home for three years a tax credit of 10 percent of the purchase price, up to $8,000. Single buyers with incomes above $145,000 and couples who make more than $245,000 are not eligible.
There is also a credit of 10 percent, up to a maximum of $6,500, for buyers who already own a home. To qualify, they have to have been homeowners for at least five years. The same income limits apply.
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