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February 27, 2009

Housing price forecast

Filed under: Economics — Fei @ 11:36 pm
By Michel Filion

By Michel Filion

President Barack Obama proposed the fiscal year budget for the next few years. One significant point in the proposal is that the mortgage interest deduction will be limited to 28 bracket. Governor Arnold Schwarzenegger raised income tax, sales tax, and property tax for fiscal year 2009-2010.  Both will have BIG effect on the housing price of silicon valley. 

I forecast that the price of condominiums and low priced single family homes will continue drop for the next few months, but the price will reach bottom before the end of the year. (Hopefully the economy will rebound as well). 

However, the high priced homes will find it tough to regain ground. Their prices will lag, mostly due to the limitation of mortgage interest deduction (if the proposal passes), and tThe tax increase in both federal and state level. The affluent will suffer financially during the Obama term and the housing market will be down for quite some time. 

As for 4-plex, 8-plex, and apartment complexes, it becomes tough to find renters with decent rent.  One is that the huge lay-offs now make a large population moving out of California. The rising income tax and sales tax does the same. Basically, fewer people will be in California. The relatively cheap housing price will draw a portion of people with steady jobs buying houses instead of renting. 

I will see how correct/wrong I am….

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