Over half of American homes will drop in price between now and next June. That is the conclusion of an article on CNN.
This has to do with the fiscal cliff, we are told. The fiscal cliff will produce a recession.
The question is this: Why won’t we get a recession anyway? The signs are there.
Home prices fall from winter through June in most years. Sellers who must sell are forced to lower their prices. This is irrespective of the fiscal cliff.
Home inventories remain high. Banks refuse to foreclose. Owners stop paying and live rent-free. They can build capital for their next home purchase.
Congress may revoke the interest deduction on mortgages. This will hit the rich harder than it will hit the middle class.
But maybe not. That deduction is a sacred cow. Will House Republicans accept it? They have mortgages.
Fiserv’s estimates assume that about half of the fiscal cliff tax hikes and spending cuts will occur, said Stiff. The forecast does not take into account any change to the mortgage interest deduction. Should that deduction expire, Stiff said home prices might be even weaker over the short-term.
It’s time to start shopping for investment houses. I am. I recommend it.