Former Federal Reserve Chairman Alan Greenspan is saying that the U.S. unemployment rate is going to break the 10 percent mark before long and hover there for awhile before the trend reverses.

Speaking with George Stephanopoulos Sunday on ABC’s “This Week,” Greenspan said

“…At some point, we’re going to start to see an improvement in employment, but remember that unless there is a monthly increase of more than 100,000 a month, you’ve still got the unemployment rate continuing to rise.”

“My own suspicion is that we’re going to penetrate the 10 percent barrier and stay there for a while before we start down,” he said.

His predictions are not all that shocking considering the Labor Department announced on Friday that the current unemployment rate has reached 9.8 percent.

Yet even as jobs continue to be slashed, the housing market seems to be doing just fine. Of course, the government tax credit for first-time home buyers might have a thing or two to do with that.

The National Association of Realtors announced last week that its pending home sales index rose 6.4 percent in August for the seventh straight month. Pending home sales are a loose predictor of actual home sales as they track signed contracts. And while actual sales have been on the rise, they have not matched the pending home sales pace as a certain percentage of buyers back out and as plenty of short sales are rejected by banks before closing.

And the tax credit set to expire December 1 has been a big contributor to the upswing in real sales over the past few months. One survey found that 43 percent of buyers in August were first-timers.

“No doubt many first-time buyers are rushing to beat the deadline for the $8,000 tax credit, which expires at the end of next month,” said NAR chief economist Lawrence Yun. “Sales will decline when the tax credit expires because we are not yet on a self-sustaining recovery path. It also raises a risk of a double-dip recession. Extending and expanding the tax credit is the best tool in our arsenal to encourage financially qualified buyers to stimulate the economy and help reduce the budget deficit.”

If the tax credit is extended, things could continue to look strong in the housing market as long-term mortgage interest rates fell below 5 percent again last week. I guess the question is whether the housing market can find a sustainable level of growth before unemployment figures level off.

With the summer sun slowly setting in the distance, the US housing market is preparing itself for a potentially rough winter. The warm weather of summer typically causes a flurry of frenetic activity in the property industry and despite the current economic climate there have been some encouraging signs during the summer months. This positive momentum has led some experts to predict that a period of stabilization might not be too far away. Indeed, Professor Jeffrey Fisher of Indiana University Kelley School of Business is optimistic about the immediate future of the housing market, stating that he believes, “the worst is behind us.” Professor Fisher’s optimism isn’t shared by everyone, though, and many see the recent boom in activity as the calm before another impending storm.

With the Recovery and Reinvestment Act 2009 due to end in November, many are predicting a drop-off in the number of first-time home buyers and the lack of new capital in the market could cause another mini-slump. With only three months left until the tax credit expires, the race is on for first-time purchasers to get a much needed leg-up into the housing market. If you’re considering making your first purchase, here’s what you need to know before applying:

• The tax credit is for first-time home buyers only. For the tax credit program, the IRS defines a first-time home buyer as someone who has not owned a principal residence during the three-year period prior to the purchase.
• The tax credit does not have to be repaid.
• The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
• The credit is available for homes purchased on or after January 1, 2009 and before December 1, 2009.
• Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.

(Source - FederalHousingTaxCredit.com)

The tax credit may have provided a much need shot in the arm for the housing market but the scheme isn’t enough to provide a lasting cure for the industry. Late mortgage payments reached a record high in the second quarter of this year and with a steady rise in the number of foreclosures it seems the road to recovery will continue to be slow. Some predict the slump to last until mid-2010: “A rise in foreclosures will keep the housing recovery slow and weak, and will continue to place downward pressure on house prices until mid-2010, but at least the end is in sight.” (Celia Chen, senior director of housing at MoodysEconomy.com)

The bottom line for prospective home buyers is to tread carefully over the next few months. While the recent boom has had some positive impact on the market, the overall affect is marginal and with the tax credit soon to end the winter looks to be an unsettled period. Buying a home in the current climate is risky business but if current predictions are accurate the forecast for 2010 should be a lot more pleasant for those wanting to take their first steps on the property ladder.

Home prices will continue to sink another 11 percent in the coming months, resulting in a 36 percent overall decrease in home values, according to report released Monday from Moody’s Economy.com, but the silver lining is that they will bottom out by the end of the year.

“Notwithstanding the intensifying economic gloom, the bottom of the housing downturn is within sight,” chief economist Mark Zandi said in a statement today. “Presuming we see strong action by policymakers to help support the economy and the housing market, prices will begin to recover by the end of this year.”

To date, the 381 metropolitan areas included in the Case-Shiller home price index have experienced a 25 percent decrease on average in home values. Before the end of 2009, Moody’s predicts that 62 percent of those areas will see double-digit declines before the correction is through.

The house prices in Southeast Florida is likely to be hit hardest during the coming year with values in Naples, Florida forecasted to fall 70.1 percent from 2005 to the last quarter of 2010. Moody’s predicts that the next biggest losses with be in Merced, California where prices will probably drop 69.6 percent.

Moody’s predictions are all based on assumptions that the U.S. government will aggressively legislate ways to stimulate the economy. “Policymakers have not yet been able to break the downward spiral that has developed among the sinking housing market, job losses, frozen credit markets, and rising foreclosures,” Zandi said.

Yet, even if the newest bailout package comes together and consumers profit from an expansion of the first-time home buyer tax credit, Moody’s warns that the housing market recovery after 2009 will not not bring growth back to its pre-downturn rate until the end of 2010.

Restoring the strength of the U.S. housing market is at the top of President Barack Obama’s priorities as it is for many members of Congress these days.

In his weekend address, President Obama revealed the possibility of a revised and expanded bailout program for the financial sector. “Soon my Treasury [Department] secretary, Tim Geithner, will announce a new strategy for reviving our financial system that gets credit flowing to businesses and families,” he said in remarks.“We’ll help lower mortgage costs and extend loans to small businesses so they can create jobs. We’ll ensure that CEOs are not draining funds that should be advancing our recovery. And we will insist on unprecedented transparency, rigorous oversight, and clear accountability — so taxpayers know how their money is being spent and whether it is achieving results.”

The House of Representatives passed its own version of a bailout/stimulus package last week that includes tax cuts and new government programs. The President asked the Senate in his weekend speech to quickly pass the House’s bill, called the American Recovery and Reinvestment Act of 2009, in order to speed up the return of economic stability.

Some in the Senate from both parties are pushing, however, for several amendments to the bill before it is passed. Republican Senator Mitch McConnel from Kentucky, for example, wants to see a provision that would make mortgage loans available to good credit home buyers at a 4 percent interest rate, with the government possibly making up the difference between the lower rate and the market rate.

Democrat and Republican senators have called for an extension of the first-time home buyer credit to include all primary residence purchases as well as stretching out the credit amount from $7,500 to $15,000. And Senator Christopher Dodd, D-Conn., would like to the bill to include a90-day moratorium on all foreclosures nationwide.

President Obama was cautious in his hopes for the immediate success of the stimulus bill, however, saying that the “economic recovery will take years — not months.”

“No one bill, no matter how comprehensive, can cure what ails our economy,” he said. “So just as we jump-start job creation, we must also ensure that markets are stable, credit is flowing, and families can stay in their homes.”