I totally disagree with Tony on this. Increasing taxes will affect the housing market more than cutting government spending. Lower taxes means more discretionary money available. The government has increased spending by about 40% in less than 3 years. Cutting it back by the small percentage that is being proposed will still keep the spending too high.
Home prices have dropped in excess of 50% in many communities. The average drop is closer to 38% at this time. The most stable buyers have been people on the government payroll whether federal. state, county or city. In fact, the public was upset that so many private sector jobs were lost while the public sector received job security. This has been changing rapidly within the past year. The new deal that is about to be passed in congress and signed by the President will demand massive cuts in Federal spending and not increase taxes. This is wise for long term planning but will devastate the real estate market. Loss of jobs is not the cause of this new crash, it's the threat that a job is not secure. Most people won't take on new debt if they are uncertain about future employment.
Your Friend & Realtor,