The end of the tax credit
Realtor Notebook
By Teresa Boardman, Thursday, April 15, 2010.
These last few months after the extension and expansion of the federal homebuyer tax credit program have been interesting.
Last fall I was in a panic because I had two closings that did not seem like they would make the deadline for the first-time homebuyer tax credit, but we got lucky and the deadline was extended. My buyers were relieved we had worked hard to beat the deadline.
This year it seems like the homebuyer credit just kind of sat out there and people did not get too interested in it until February or so. There was some activity in November that was left over from October but not a lot.
It could be because of the weather in these parts or maybe it was part of the general malaise about the economy.
This month has been very busy. I have literally had people call with a sense of urgency about buying a home. Unfortunately, none of my sellers have been eligible for the tax credit. My sellers have either not owned their homes long enough or have not lived in them long enough, or both.
Yet some of my sellers did benefit from the tax credit, as they got offers on their homes and they were not on the market for very long.
I am getting calls from people who should not be buying real estate -- at least not in my humble opinion. The young man from out of state with the two-year internship here in the Twin Cities, for example.
He is convinced that it is better to buy than to rent, even if he plans on moving in two years. He isn't taking my advice, so we are condo shopping.
In general, I am telling my clients that an $8,000 tax credit is not worth making a $150,000 to $350,000 mistake.
I tell them if they are ready to buy and if we can find the right house, they should do everything they can to take advantage of it. I know that isn't what I am supposed to say, but I doubt I will ever change when it comes to telling it like it is -- even if I lose business because of it. ...CONTINUED
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Submitted by Debra Sinick on April 15, 2010 - 12:03pm.
Debra Sinick, GRI,CRS
Windermere Real Estate/East,Inc.
Kirkland, WA
425-260-3219
www.eastsiderealestatebuzz.com
www.debrasinick.com
Hi Theresa,
I like your advice to buyers. You're making sure they are clear on why they may be purchasing a home now. Home buying isn't for everyone, even with a tax credit.
I wouldn't be surprised to see a little bit of a lull in housing sales at the end of the tax credit. So many buyers are making that push to buy a home by the 30th of April.
However, there will always be those buyers who need to buy because of a growing family, downsizing, job changes, etc. These are the buyers who aren't ready to make a move now, but will be in the near future. I just spoke with one today!
The location factor will also play into the real estate market, as always. Some locales will remain stronger because of the local economy and real estate sales will continue to happen. I expect this to happen in my market, the eastside of Seattle, because we still have many people projected to be moving into the area.
Submitted by John Rakoci on April 15, 2010 - 2:30pm.
Many bought only because of the tax credit. Very few made a great buy as they were ready to buy even without obama-money. Some were lucky and the credit was enough to help them get in a home earlier than they would have while saving in this economy. Others bought as they saw the gift as a way to get a home they should not have bought. As soon as a hot water heater or roof is needed many of those buyers will find their credit going down and the home going into foreclosure. As the FED stops buying our bonds interest rates will rise. Added to the loss of obama-money the rates should go up and prices down as buyers become more rare.
Submitted by Robin Fenchel on April 15, 2010 - 3:23pm.
Hi Theresa,
I believe that your correlation between the Federal Home Buyer Tax Credit and the improvement of the housing market stats are correct.
Here, in Irvine, California, we have seen the return to a seller's market with multiple offers occurring particularly in properties priced under $800,000 due to the lack of inventory in this price range, low interest rates, and the impending expiration of the Federal tax credit. I, too, believe that we will see a decline in demand after its expiration and a flattening or declining of housing prices.
Currently, there is a rush to buy before April 30th, 2010, and close after May 1, 2010 in order for those buyers who are eligible to be able to obtain both the federal and California state tax credits.
Interest rates are beginning to edge up, high unemployment numbers in Southern California are still with us, and there are more impending Short Sales and Foreclosures. We will see a seasonal increase in the inventory as we approach the summer months. However, just as sellers are becoming aware of the upward trend in housing prices, the buyers will have begun to pull back having lost some or most of the tax incentive, coupled with higher interest rates, and a larger supply of properties from which to choose.
I have suggested to some buyers that they wait to see in what direction housing prices will move after the tax credit expires--especially if they do not have to purchase a home during this frenetic rush toward the home buyer tax credit deadline.
I'll be interested in reading what others have to say on this subject here in this forum.
Best regards,
Robin Fenchel
http://Robin4Homes.com
http://IrvineRealEstateBlogger.com
Submitted by Josette Skilling on April 15, 2010 - 3:36pm.
Amen.
Josette Skilling
http://bethesdabuzz.com
Submitted by Julie Emery on April 15, 2010 - 3:40pm.
Theresa,
I think you're likely right. The frenzy in the low end of the market right now is ridiculous and I've actually advised one couple today that can't use the tax credit that they might be better off waiting 2 weeks and resuming their search then.
Tax credits seem unlikely to build a sustainable market. An economic recovery could do the trick along with better employment numbers. Seems we may be waiting awhile for that combo though.
Julie Emery, Associate Broker
REALTOR, e-PRO, GRI, SRES, EcoBroker
Century21 New Millennium, Licensed in VA
540-987-0510 (office) 540-270-2742 (cell)
http://www.JulieEmery.com
Submitted by Lester Barker on April 19, 2010 - 8:34am.
I thought the craziness was over, then just sold a home for 275k with 5k down and a 8k credit. Ominous?