Last Updated Dec 20, 2009 9:52 PM EST
Don't break out the Prosecco just yet.
What's driving the fairy tale? A rebounding economy, some of the lowest mortgage interest rates in 50 years, and a boatload of foreclosures (both houses and unsold vacant lots in partially-developed communities) that will be sold at once-in-a-generation prices.
And then there are the home buyer tax credits. The $8,000 first-time home buyer tax credit and the $6,500 trade-up buyer tax credits won't expire until June 30, 2010 (you have to have a valid contract by April 30, 2010 and close by the end of June to qualify). That should give some additional upward momentum, particularly through March and April, as home buyers feel pressure to "move it or lose it."
But what happens on May 1st, after the April 30 deadline has expired? Will the economy have rebounded enough to carry the momentum forward?
Or, will we have pushed many of a finite group of buyers forward by the artificial deadline imposed by the tax credit?
And then there's the $1.25 trillion mortgage-backed securities buying spree the Federal Reserve has been on. That's supposed to expire on March 30, 2010, a one-quarter delay since someone at the Fed realized that if it didn't continue to buy mortgage-backed securities, it's likely no one else would - at least not at the incredibly low interest rates (can you say 4.75 percent for a 30-year fixed) the Fed was offering.
I hate to be a Nellie Naysayer, but I don't really understand how the economy can jack up enough momentum to truly stabilize the housing market over the next quarter. With unemployment at extraordinarily high levels, another 4 million foreclosures expected to come on line in 2010, and the shadow inventory of foreclosed homes owned by lenders but not yet on the market rising significantly, it's hard to imagine that we'll be at 2005 as quickly as Wall Street would like.
Imagine this: It's 1988 and half of Southern California has woken up realizing that their property is worth roughly half of what it was the day before. It took until 1994 for property prices there to get back to where they were before the collapse in 1988.
Six long years to get back to parity. Tons of foreclosures and ruined financial lives along the way. And what happened there and in the Northeast was more or less confined. It wasn't caused by the same sort of financial disaster we've just lived through.
I'm not saying 2010 won't be better. For the millions of people suffering with long-term unemployment, no health insurance and personal financial disasters, I sure hope it will be.
I'd just rather be surprised on the upside than spend another year lowering my expectations.
Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask. She blogs about money and real estate at ThinkGlink.com.