Following four months of gains in the housing market October home prices started to level; however, the housing market may stall and prices may start to decrease again. The main reasons for the home prices taking a step backwards would be foreclosures, increase in interest rates and the end of tax credits, CNN/Money reported January 1, 2010.Foreclosures: Mortgage modification programs put in place by the government are not assisting homeowners as planned. Most modifications are not permanent, but are only trials. The modifications that are completed are seeing default rates the second time around at an even higher rate. Experts insist the hardest hit states will be Arizona, California, Florida and Nevada.
Interest rates: Analysts believe the interest rate on a 30-year mortgage loans will be about 6 percent or more by the end of the year. Programs set in place to by the government to help the housing market may be coming to an end. In March, the Federal Reserve will no longer help to keep rates low be buying mortgage-backed securities.
Tax credits: In April the home buyer tax credit will end. The credit gives $8,000 to first time home buyers and $6,500 to buyers that own a home. After the tax credit ends the demand for homes may decrease dramatically.
These factors likely will have much less of an impact in Massachusetts where housing inventory in many communities has declined dramatically over the past year.