The 11th hour deal to avert the fiscal cliff included a one-year extension of the Mortgage Debt Relief Act. The Act, which frees homeowners from paying tax on forgiven mortgage principal, has become an important part of the housing recovery by helping to drive a shift towards short-sales in place of foreclosures. While the fiscal cliff deal has only kicked the can down the road, it does at least give some breathing room for the housing recovery to continue. Indeed, with supply conditions tightening again in the latest data, house price gains look set to continue apace in the opening months of 2013.
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