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Can Portland Market Survive the End of the First Time Buyer Tax Credit?

By
Mortgage and Lending with Willamette Falls Financial

By just about any statistical measure, real estate sales in the Portland real estate market are way up.

Here are the numbers… 1,799 homes sold in Portland during the month of March, a 52% increase from March of 2009. Pending sales are up 46%, and new listings are up 35%.

The numbers are eye popping. But is this surge a result of an improving economy. or was it just buyers scrambling to get it under the April 30 expiration of the $8,000 home buyer tax credit put in place last fall?

To qualify for the tax credit, buyers had to be “in contract” by April 30, and close on their purchase by June 30.

Nishu Sood, an analyst at Deutsche Bank, told the Associated Press that after the credits are gone, “the most likely scenario is that, starting in May, sales will fall off again,” said “You will see a letdown.”

There’s little doubt that the lure of the tax credit is spurring a lot of this activity. I have one client already under contract, and two trying desperately to get there, and all of them have the tax credit on their minds.

Portland real estate agent Jeff Bale of redfin.com is having a similar experience, “the tax incentive seems to be driving a significant amount of the increased traffic. I am personally working with 3 buyers all scrambling to find the right house before the end of the month, and another client that sold their property and are in contract on another all thanks to the tax credit. ”

Some sellers have apparently gotten wind of the tax credit gold rush. There is anecdotal evidence from some areas that sellers are playing hardball while negotiating everything from price to repairs, thinking that the credit’s expiration gives them more leverage. I personally think they’re playing with fire, and may get burned if this wave of buyers washes back out to sea after May 1st.

But we do see a lot of activity in Portland, and suburbs like Lake Oswego, Wilsonville and West Linn. One of my buyers recently relocated from the bay area, and he and his wife knew they wanted to buy in Portland. The existence of the tax credit sped them up a little, but they would have been making an offer at some point this spring or summer anyway. So maybe the Portland real estate rally will have some staying power. I think Bale has it right, “What will May bring? Let me check my crystal ball.”