What Effect Will the Stimulus Have on the Real Estate Market in 2010

The Stimulus package that went into effect more than a year ago, also known as the American Recovery and Reinvestment Act of 2009, has had varying degrees of success in different aspects of the economy. The question now, as we head deeper into 2010, will be what effect will it have on the real estate market this year and for years to come?

The question is not an easy one to answer and, depending on whom you ask, you are bound to get a variety of responses. The first step in attempting to solve this dilemma is to note what has happened in the past year. The stimulus package is credited with helping a number of new homebuyers with the tax credit, which was extended until April 30, 2010. It is argued that this tax credit helped to stabilize the housing market in 2009.

Now, as we move forward into this year and are facing two obstacles in the termination of the tax credit as well as an expected move by the Federal Reserve to cease buying mortgage-backed securities, the market is poised for some volatility in the coming months. Add to that the fact that the FHA is expected to raise insurance premiums for mortgages and there is plenty of speculation to be made.

All signs indicate that the real estate and mortgage industry is about to face another daunting challenge this year and well into the next. So will this new phase of the Obama Administration’s stimulus plan have any bearing on the industry? Let’s explore a bit further.

The major force of economic growth in a nation is its ability to create and maintain jobs. When people are working, they are spending and the cycle spins around in a perpetual dance. The Administration is focusing its efforts on construction, both in the private as well as commercial markets. There haven’t been many success stories after this initial year of the stimulus, so let’s assume that this year lights the way toward recovery.

Construction will mean more homes and commercial properties being built in certain cities and neighborhoods. The jobs that are created through these efforts, as well as through highway projects and such, will certainly have a positive impact on tens and maybe even hundreds of thousands of workers who rely on the construction industry. Yet these workers, who many have been without work since 2008, will not have the means to invest in real estate for some time.

This situation poses a serious risk for the housing market. While property values remain low, the time will still be right for buyers to purchase the home of their dreams, even if they miss the tax credit deadline or face higher FHA premiums. One of the driving forces in the latter part of last year was the tax credit, which helped to boost assessed values with more buyers looking at homes. If banks release more foreclosed homes to the market this year as well, then it’s possible that home values will drop another ten to fifteen percent overall.

With the real estate market already struggling, it’s unclear whether the stimulus moving forward will directly affect the housing industry, but all indications are that 2010 will be a difficult year regardless. If the stimulus is successful in putting people back to work and driving the economy in a positive direction, then the real estate market will reap the benefits. If it can’t boost the sagging economy, then we will continue to see a volatile and depressed market for the foreseeable future.

(ArticlesBase SC #2482984)



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