Looking at the chart above, it becomes obvious when the music died in the Richmond, VA real estate market. There are a few other things that I think are not as obvious that could stand some analysis
The Q4 2008 Was Trending Down Predictably:
Most analysts lament Q4 2008 as the pinnacle of the real estate crisis. Yet when we look at the baseline for the Richmond trend (which are the southward peaks), we can see that the lowest peak wasn't too far off of the trend. If we draw a line connecting the lowest point of the dips since 2006, Q4 of 2008 would fall right in line.
The Tax Credit Shifted the Market Dramatically:
It is undeniable, looking at this chart, that the Federal housing Tax Credit of 2009 and extending into 2010 shifted the entire market by way of raw units. With that said, the question remains whether the tax credit actually created new business or simply robbed buyers from the future by forcing folks who weren't quite ready to buy into the market to capitalize on Uncle Sam's generous gift.
Well, the question is starting to get answered...
The Missing Piece:
September 2010 sales were down 42% from September of 2009 here in Richmond. October is trending towards a 50% decline. We'll know in a few days, but based on attorneys and closing companies I've talked to, it's not going to be a strong finish for October.
These are historic decreases for our area. I've gone back 15 years, and I can't find another decline that's even 50% as large as those.
What Does All This Mean:
It doesn't take a rocket scientist to figure any of this out. The tax credit didn't create a better market, it simply stole business from next year. The same thing happened to GM and other American car companies when they offered huge rebates, employee pricing, and 0% financing for 72 months. Those things didn't make more people want to buy their products, they allowed the companies to simply steal from the future business of their current market base.
This is what we've done with this tax credit. You heard it hear first. My prediction is that after a disastrous Q4 2010, NAR and others will be clamoring for another tax credit to spur home sales. We will have to make the decision of whether we want to tighten our belts and weather the storm, or take out another mortgage on our future business.
To me, the choice is clear. What say you?
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