After a remarkable recovery in housing, even the perma-bulls are throwing cold water on the outlook for the next six months.
Because much of the recovery has been driven by two factors, both of which are likely coming to an end:
- The expiration of the tax credit, which was extended to April and probably won't be extended beyond that (though anything's possible in an election year)
- Rising mortgage rates, as long interest rates rise and the Fed eventually stops subsidizing mortgagerates and actually starts selling mortgage-backed securities back into the market (driving mortgage rates higher).
It's possible, of course, that neither of these things will come to pass. The desperate Congress could extend the voter bribe tax credit until November 5th, and deflation might yet take hold and drive mortgage rates to new lows, a la Japan. But for now, it looks as though we're coming to the end of the gravy train.
Before we starting whimpering, though, it's worth reviewing how remarkable the recovery in sales velocity has been. Check out the charts below from Northern Trust: