Let me start by saying the views expressed in this blog are mine alone and in no way reflects the beliefs or opinions of my company or any others. The two quotes I mention below are just two of several I have seen recently that offer a similar opinion on the tax credits and their effect on the real estate market. Let me also say that my view may be skewed a bit as well, due to the fact that much of the work we do is representing first time buyers. This post is a reflection of what I experience daily and what our clients tell us.
In my previous post I pointed out some good news on the real estate front, among them the first time home buyer tax credit extension and expansion. A few recent quotes around this issue include, "I am not applying the recent home-price rebound to the tax credit," said Cameron Findlay, chief economist at LendingTree, in a recent interview. "I don't think the tax credit makes as big an impact as people make it out to be, although it certainly motivates first-time buyers," he said. "If it expires, I don't think it would shake the housing market as much as some have predicted." And in a recent interview, Fox-Pitt Kelton analyst Robert Stevenson said the Senate's proposal for extending the $8,000 tax credit for new homebuyers will have a "limited impact" on home sales. Ok, so what do these analysts attribute to the fact that for 8 consecutive months (according to the National Association of REALTORS) housing sales have spiked? If not the tax credit, then what is it? Look, I know this is not all we need to continue the recovery, but from the perspective of someone on the street these measures absolutely make an impact! Here's what NAR has to say:
Pending home sales rose again, marking eight consecutive monthly gains - the longest streak since measurement began in 2001, according to the National Association of Realtors®. Lawrence Yun, NAR chief economist, said the momentum is understandable. "What we're witnessing is a rush of first-time buyers trying to beat the expiration of the tax credit at the end of this month," he said. "Home values will stabilize sooner rather than over-correcting. That, in turn, will mean wealth stabilization for the vast number of middle-class families and lay the foundation for a durable economic recovery."
We can argue the merits of tax credits all day, but the reality is 40% of first time buyers have said they only bought a home because of the credit! 40%! If that does not say it all then what does? Our recent experience tells me that with the looming deadline of the first time buyer tax credit has caused buyers to stop their search as they now understand they could not beat the deadline. By extending it we will see a spike in activity as these buyers get back in the game and drive volume into 2010. The proposed extension that will include a $6500 credit for move up buyers will also have an impact. By including language that the move up buyer has had to have owned the home for at least 5 years, that effectively limits the number of potential buyers...and sellers...that are upside down. Don't overlook what I said...sellers! This credit will help drive fresh inventory that we desperately need to the market and create not one but two transaction sides. This was a bold move by Congress...and a smart one. I have blogged about this in the past, we have huge need for new inventory. Most homes have multiple offers or are in the long process of getting short sale approval from the banks, so it has limited what buyers can select from. Add in that more cash buyers are flooding the market and it makes it even more difficult for FHA and VA buyers to get offers accepted. This is the reality of the market and varies drastically from what is reported. You want the straight truth? Talk to a busy REALTOR who is out in the trenches all day.