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Tuesday, January 5, 2010

What Happens When the Stimulus Dies?

Assets supported by that stimulus die as well. Marketwatch details:

"Pending home sales plunged a seasonally adjusted 16% in November as a highly popular tax credit for first-time buyers was set to expire on Nov. 30, the National Association of Realtors reported Tuesday.
The good news...

The pending sales index -- which measures contracts signed but not closed on previously owned homes -- was 15.5% higher than in November 2008. October's increase was revised higher to 3.9% from 3.7% previously reported.

The Bad News:
The tax credit was ultimately extended through the first half of 2010 and expanded to repeat buyers.
Why bad? Well, besides another "pulling demand forward with taxpayer money" issue, without the revival of the tax credit, things would have been a lot worse. Not a good sign for the sustainability of the housing market.