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Stumble Off Cliff Won't Matter in Long Run, Case-Shiller Says

That rosy scenario could show some thorns if Congress and the White House can't agree on an economic plan to avert the so-called fiscal cliff, scheduled to appear January 1 when major spending cuts from last year's debt negotiations are set to trigger, as are the sun-setting of the Bush tax cuts from 2001 and 2003. Fiserv Case-Shiller estimates that the resulting economic slowdown, if the cliff issue isn't addressed in Washington, will result in a "weaker" housing market in the spring and summer of 2013.

"In some markets, investor demand for housing will start to fade before first-time and trade-up buyer demand has ramped up enough to take its place. This will be most evident in markets with large foreclosure inventories," Stiff says. "Currently, investors are snapping up foreclosed properties almost as quickly as they are being listed for sale, but the pool of investors is limited and, as prices rise, the potential returns on residential real estate diminish. Consequently, Fiserv Case-Shiller projects a small, short-term price decline for many markets that recently experienced double-digit appreciation."

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The good news is that Fiserv Case Shiller sees the fiscal cliff issue as a "hiccup" for the housing market, and that even with the cliff in play, the housing market would be set to rebound in the second half of 2013. Overall, the index pegs the annual rate of growth at 3.3% from this year to 2017.

"As consumer confidence improves and people become convinced that home prices have stabilized, demand from first-time and trade-up buyers will return to normal, ensuring a sustained housing market recovery," the index says.

That's quite the table-setter from Fiserv Case Shiller.

If the housing market can shake the fiscal cliff issue, housing growth over the next five years might just put a serious dent in the damage done by the losses homeowners incurred over the past five years.

Finally, it seems, the US housing is trending in the right direction -- even if there is a cliff in its path.

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