The end of the first time home buyer tax credit is right around the corner. Lenders, realtors, and clients are scrambling to get into contracts, and get the process moving. The tax credit has created a lot new customers, but is it enough to sustain after the credit goes away? That is a hard one to say for sure. What is known, is that there are a lot of homes that are sitting on the sidelines. That will be the story of 2010.
The graph below shows how many homes are late on their mortgage, but have not started the foreclosure process. Crazy, huh. That is why I hold to my prediction, below.
My prediction? Once the tax credit goes away, the average price for a new home will drop at least $8,000. And, the price drops will continue as Fannie/Freddie release the homes they have sitting on their books. Below is a great chart from Keeping Current Matters. This is a great real estate blog that I follow. I recommend reading it.
It may be a good thing for buyers if prices drop more, but a bad thing for those selling, or trying to refinance. Keep in mind though, buyers, that a price reduction of $20,000 is negated by an interest rate increase. And, folks, that is where things are headed. Up.
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