House prices have started to fall back in response to the plunge in
sales seen since the homebuyer tax credit expired in April. Both the Case-Shiller
and FHFA indices showed prices fell in July. (See Chart below.) It is mildly
encouraging that home sales in August nudged up from their post-tax credit floor.
But the recent rise in mortgage applications for home purchase is small given that
mortgage rates have dropped to a record low. Finally, the freezing of foreclosure
sales by some banks has placed another question mark over the near-term
outlook for the housing market.
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