CreditSights: Bearish on housing

"As we have repeatedly commented over the past few weeks, we believe the current positive momentum in the housing sector (especially in the equity market) has been a product of government life support and cannot be sustained once government initiatives that were implemented to boost the sector come to an end.The recent improvement in home demand and prices has been the result of government efforts to lower mortgage rates and provide tax credits for potential home buyers. The homebuyer tax credit expires on December 1 this year, while the Fed’s program of buying MBS–which have kept rates low and mortgage loans flowing–will eventually wind down. We are concerned that once this happens, the momentum of better sales could halt unless jobs are created and mortgage rates remain low…."