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Home sales skyrocket

The news from the housing sector continues to be excellent. The surge in sales in recent months was undoubtedly helped by the anticipated expiration of the tax credit for first-time buyers, but I don't think we can dismiss this news entirely (not least because the credit has been extended). Sales are up no matter how you look at it. This market is now clearing, which means that prices have fully adjusted to the new realities. House prices are down and interest rates are down, making housing more affordable now than it has been in many decades. The inventory of homes for sale has shrunk dramatically, thus making room for all the homes that will be coming on the market as the result of the "second wave of foreclosures" that the world has been fretting about for most of the year.

It's extremely significant that the housing market has cleared to this extent. Prices are no longer falling, and that puts an end to the fears of a downward spiral that would undermine the balance sheets of the institutions holding mortgage-backed paper. It also restores confidence to the housing sector, as people realize that they are no longer trapped with a depreciating asset. Household balance sheets are again improving. Those who want to move to where there are more jobs, can. Life goes on, and things get better, and that's the way it should be. A lot of the plans that got put on hold a year or so ago are now being put back on the drawing board.

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