Recovering from the Recession: Is the Housing Market Rising or Falling?

Though the country has begun to pull out of its recession, the housing market still has a significant role to play in the tentative recovery efforts. It was the subprime collapse that precipitated the avalanche of unemployment and general economic slowdown, and with real estate transactions making up 15% of the economy, it is easy to see why economists are hesitant to claim that the end is in sight with various regional markets still struggling. Housing prices are still down 30% from their peak in 2006, and over the country, they may fall another 5-10% this year according to Moody's economy.com.

Government efforts to stem the tide have been mixed in effectiveness. The Federal Housing Tax Credit, designed to encourage first home buyers to take the plunge and keep the housing market afloat, is set to expire at the end of this month. To help "underwater" homeowners with their mortgages, a refinancing program was developed in November, but as of yet it has helped only a small fraction of eligible homeowners. The program was recently expanded, but the effects will not be felt for months at the minimum. And further government interference may be interpreted by skittish buyers and home builders as a sign of no confidence—potentially destabilizing the market even further.

Even with these ominous signs in the national market, not every indicator is bad—at least, for some parts of the country. With regards to both rises and falls, changes are often first precipitated in the local markets before spreading nationally. And housing prices in Dallas Fort Worth metroplex, while still 11% behind its peak for 2007 averages, are a far cry from the 30% or greater seen in other areas of the country. Last year housing prices even rose: 4% from January 2009 to 2010 in DFW. This means that overall economic recovery might just start in the stronger metroplex areas. When buying real estate it is important to understand the market you are in and knowledgeable real estate agents who understand your market can help you with timing to capture the opportunities out there. For investors purchasing rental properties in an improving geographic area, they can still catch the buys that are 10% below the current market combined with a market that may be 10% below its peak, which combines for a total of 20% below the market peak. For a real estate investor looking to purchase below market and resell at a future date it could be a good time. For a real estate investor in a market area that is continuing to decline they need to do their homework and check their pockets when evaluating their exit strategy. To answer the million dollar question of recession recovery that is going to depend on which channel you are watching, what analyst you are listening to, or what neighbor you are having conversation with,... if its a neighbor that is one of the ones that is out of work and looking for a job you might tend to believe that the recovery still has a ways to go. The question for the housing market is will depend on where you live, is your housing market rising or falling?