Urgency makes people buy and sell Real Estate? Without urgency there is no market. Urgency is what had been missing for almost a year. Our government has been trying to stimulate the Real Estate market for years. The 2009 First Time Home Buyer Tax Credit did just that. It stimulated the Real Estate market by creating a sense of urgency for First Time Home Buyers. An incentive would be given for getting off the fence and getting into their first home. The benefit of the tax credit (to the housing market) was that the home had to close title by November 30, 2009 to qualify.
Urgency was created! Not only do you have to purchase a home to receive the credit, you have a certain time frame. The last week of October, I received no less than a dozen phone calls from people who had never purchased a home, but now wanted to get in on this government program. Not everyone realizes that you can't purchase a home in the same timeframe that you can purchase a car. Cars and homes are not the same, this leads us to our next point.
Is it wrong to believe that all good things come to an end? Cash for Clunkers originally was originally a $1 billion dollar idea that became $3 billion. Has anyone else realized that Cash for Clunkers was a temporary way to prop up sales for the auto industry? The effects of that program will be seen in the coming months of January and February when car sales will be terrible.
Real Estate has been missing urgency for the most part since September of 2008. The stock market took a beating because of the failure of large financial institutions that were leveraged in subprime loans and credit default swaps. The week beginning October 6, 2008 saw the Dow Jones Industrial Average drop over 1,874 points or 18%. People were starting to feel the pressure. If that wasn't enough, we had a Presidential election looming. More questions about who was going to lead our country, more uncertainty. Once the election was settled, there was the waiting until the inauguration and then the questions arose about the stimulus plan.
There was no urgency for anyone to buy and sell for almost six months. On February 17, 2009 President Obama signed the America Recovery and Reinvestment Act of 2009. By March of 2009, people were not as fearful as they had been in October of the previous year. At that point the First Time Home Buyer Tax Credit began to create urgency for people. First Time Home Buyers had the first eleven months of 2009 to close on a home. As November 30th approaches, people should be feeling some anxiety about waiting until the last minute. Everyone who has been paying attention knows that November 30, 2009 is the deadline. People felt the need to do something so they wouldn't miss out.
Now, Urgency has been stolen! This past week Congress has been talking about extending the tax credit. People have been calling me, telling me that they extended the tax credit. Unfortunately, at press time for this article, there is nothing official, just rampant speculation. However, all this speculation is how urgency has been stolen. People in the marketplace are beginning to feel that all good things will last forever. Good things never expire and the house that they want to buy will be there three months from now. Buyers feel that they can pay less for the house in the future and still receive their tax credit. Buyers once again feel like they can have their cake and eat it too.
The ideal situation would have been to let this tax credit expire. In January of next year, Congress could have come in and saved the day. January is typically a slow month in Real Estate and the talk about a new tax credit would be welcome news. Instead, we are just prolonging the cycle that we are currently in.
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