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Will the Looming Fiscal Cliff Impact the 2 Year High Home Values?

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The national debt has dominated the political landscape for months, and is expected to continue to do so for the foreseeable future. We may have technically dodged the so called “Fiscal Cliff” with desperate 11th hour maneuvering and closed-door politicking, but the fact remains that we as a country remain desperately in debt, to the tune of around $14 trillion dollars, a figure so high that typing out all the numbers becomes an exercise in futility. And with the cliff only just averted, with several tax cuts allowed to expire, programs cut back, and in some cases taxes actually increasing, we can now look forward to the showdown over raising the debt ceiling once again in March. Both sides have already drawn their lines in the sand.

What does all this really mean for the still recovering real estate market? The answer, like most other problems caused by this looming crisis, is mixed.

First, the good news. Generally speaking, the markets have remained confident that the government can continue to navigate these economic hurdles as they have since President Obama’s inauguration in 2008. The fact remains that the economy has steadily, if slowly, continued to improve since its lows of a few years ago, and most economists agree that this trend is likely to continue. In fact, when the United States’ credit rating was downgraded to AA status, it created hardly a burp in the economy, surprising many doomsayers that guessed to the contrary. The housing market has reflected this, and in most areas continues to recover as well.

Now for the bad. On the other side, there remains a lot of doubt, anxiety, and uncertainty about what lay ahead for the economy and the country as a whole. The path to full recovery, after all, is fraught with peril, and with two very different ways of thinking in this country as to how best proceed, consumer confidence can remain low. With so many homes remaining “underwater,” it can be easy for investors to be hesitant to enter or reenter such a fragile market.

Ultimately, the housing market should recover. Population growth in the United States remains robust, and people will always need a place to live. Cities rise and fall in this country relatively quickly, and the cycle of growth and stagnation will really depend more on local markets rather than any national trend. It comes to the investor to consider how strong their own area is when considering when and where to invest.

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