I've just spent several hours reading about the Economy and here's what I've come up with (Sorry it's so long):
The Fed Released the Beige Book, on October 21, 2009. It begins with this statement:
"Reports from the 12 Federal Reserve Districts indicated either stabilization or modest improvements in many sectors since the last report, albeit often from depressed levels. Leading the more positive sector reports among Districts were residential real estate and manufacturing, both of which continued a pattern of improvement that emerged over the summer. Reports on consumer spending and nonfinancial services were mixed."
Well, that's not too surprising - First Time Homebuyers are finally deciding to purchase with the end of the Tax Credit nearing. Further in the report it says:
"Most Districts reported that housing market conditions improved in recent weeks, primarily from a pickup in sales of low- to middle-priced houses. Contacts reported that sales were boosted by the government's tax credit for first-time homebuyers... Sales of higher-priced homes were very slow... Moreover, real estate agents in the Boston and Cleveland Districts were uncertain about the future of home sales once the tax credit expires. Availability of financing continued to be a concern for potential buyers..."
What is it that normally causes people to purchase homes? JOBS. When people feel secure about their JOB, they will then purchase homes! Dr. David Altig, Senior VP and Research Director at the Atlanta Fed, points out on October 21, 2009 that we have a PROBLEM with Jobs and Unemployment, on a scale that we've never seen before!
Underneath the usual total unemployment numbers are the reasons an individual is unemployed: You are on temporary layoff; you quit your job; you have reentered the labor market and have yet to find a job; or you are entering the job market for the first time and have yet to find a job. Or, finally, you have been permanently separated from your previous employer, who has no expectation of hiring you back.
The last category is the dominant reason for unemployment at this time. That might not seem surprising, but it actually is. Never, in the six recessions preceding the latest one, did permanent separations account for more than 45 percent of the unemployed. The current percentage stands at 56 percent as of September and appears to be still climbing
"The number of people receiving paychecks will drive the demand for houses and apartments, and the recovery will begin when unemployment stops rising." said, Jay Brinkmann, Chief Economist for the Mortgage Bankers Association,in Testimony on Tuesday.
The Obama Administration is (obviously) aware of all of this, and Congress is Holding Hearings to extend the Tax Credit... But the question remains, with a HUGE deficeit, do we NEED to extend the Tax Credit?
I thought a report by the Carnegie Endowment was interesting. It looked at Housing as a Percent of GDP, and weather a Gradual Rise in the Housing Market would impact GDP, Consumer Confidence (which most feel is tied to Consumer Spending and Job Growth). In otherwords, is the Housing Market a CRITICAL ingredient in creating a healthier Economy? YES!
"Looking forward, even moderate improvements in the housing market will provide a significant boost to the global economy."
Besides the Tax Credit, there are other factors effecting the small movements in the Housing Market. 
Obviously having historically low interest rates helps folks qualify. The Federal Government purchase of Mortgage Backed Securities is slated to END in March, 2010. When this happens:
"Analysts at Barclays Capital in New York forecast mortgage rates will be slightly over 6% by the end of March."
Coincidentially, Credit is becoming Tighter at the end of March, according to Fannie Mae Guidelines... and there are reports that the number of foreclosures entering the market will continue to rise. So again, IS THE TAX CREDIT EXTENSION NECESSARY??
"Senate Banking Committee Chairman Chris Dodd said, "We still need to use every tool at our disposal" to help the housing market. Dodd, D-Conn., has joined Sen. Johnny Isakson, R-Ga., in sponsoring a bill that would extend the credit until June 30 and expand it to people who already own homes."
It will conservatively cost 1 BILLION dollars a month to Extend the Credit.
The IRS says the level of FRAUD is "Disturbing." The IRS opened 107,000 civil cases related to the credit and identified 167 criminal schemes at an additional cost of over a HALF A BILLION $$!!
An interview of Tim Geithner by CNBC Anchor, Maria Bartiromo went like this:
BARTIROMO: You look at what happened with the cash for clunkers deal. We went from horrible to great to horrible again. The first-time homebuyer credit. So what happens when the stimulus is gone?
Sec. GEITHNER: ... We're not going to make the mistake many countries made in the past of putting the brakes on too early and creating risk that we have a, you know, weaker recovery with even higher levels of unemployment going forward.
I guess I weigh in like this. I study the Four Bad Bears. I think if the "Collective They" allow the Tax Credit to Expire, Raise rates (through a change in Policy) and make it even more difficult to purchase because of tightening Credit Score Guidelines - we're looking at a "W" in the recovery - and we'll be looking more like the 1929 - 1932 Era. Housing is an important part of the Recovery. If we had a great JOBs Picture - I'd feel differently.
as a risky proposition!
If you are looking for a new home, you are probably aware that your Credit Score is a CRITICAL item in determining your interest rate and possibly how much house you can buy / qualify for!
