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Will recession fears kill your housing dreams?

Posted by Scott Van Voorhis January 30, 2013 09:51 AM

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Just when we thought the housing market was finally out of the woods, the economy just had to come along and mess things up all over again!

Check out the reports hitting the wires right now on the Commerce Department's big bomb of an announcement on what turned out to be a disastrous fourth quarter.

Not only was there a big slowdown in the fourth quarter, with Tea Party Congress fiddling and ranting as the fiscal cliff loomed, but the economy actually went into reverse, contracting .1 percent.

This bad news comes just a day after reports that home prices nationally rose 7.5 percent in 2012, the largest increase since 2006, CoreLogic reports.

One of the big culprits behind our now shrinking economy has been a precipitous drop in government spending, especially in the defense sector. If you think we aren't vulnerable to such cuts in the Boston area because we don't have a Fort Benning of our own, think again, with defense contractors and research spending pumping billions each year into the 128 economy.

Brokers who work with execs in defense related industries are already seeing the impact of the cuts and the promise of more to come, with these potential high-end buyers having to put plans on hold until the budget mess gets resolved in Washington.

While the tax rate issue has been resolved for the moment, potentially devastating defense cuts, in addition to the trimming that has already been made, still loom, with a deadline for Congress to take action only a month or so away.

The recent warnings by Robert Shiller, the Yale economist and Case-Shiller housing index co-founder, that home buyers shouldn't get carried away with the latest positive reports on rising sales and prices now looks pretty prescient.

Shiller based his hedging on unknowns related to the performance of the global economy - makes you wonder whether he was onto something but not spelling it out.

After all, this is what he said last week at Davos, the global economic confab: "It's a good time to buy if nothing bad happens."

With the economy now looking pretty shaky again, will you be changing your housing plans? If you are a buyer, are you still prepared to take the leap? And sellers, how are you viewing this all?

This blog is not written or edited by Boston.com or the Boston Globe.
The author is solely responsible for the content.

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About boston real estate now
Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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