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San Francisco Chronicle: If you missed out on housing credit, don't fear

October 27, 2009

If you missed out on housing credit, don't fear
San Francisco Chronicle
By Kathleen Pender

... If you missed out on the $8,000 federal tax credit for first-time home buyers, which is set to expire after Nov. 30, don't despair. One of two things will probably happen: Congress will extend the credit into next year or, if not, home prices will fall as demand falls off, perhaps by as much as $8,000.

Economic theory says that "letting the credit expire will leave house prices to fall somewhere between nothing and $8,000," depending on how sellers respond to the drop in demand, says Richard Green, a real estate professor at the University of Southern California.

If a drop in demand is matched by a reduction in the supply of homes, the price decline might be close to zero. If the number of homes on the market remains unchanged, the drop could be closer to $8,000. "Of course markets don't always respond the way economics say they should," Green warns...