We all know the recent Home Buyer Tax Credit has now ended. How successful was the Tax Credit? Existing home sales figures were released yesterday and showed a 7.6% gain in April, which was in line with expectations. Both phases of the Tax Credit gave the housing market some stability, but it was only a short-term fix. Where do we go from here and will there be an adequate supply of home buyers ahead to absorb the current inventory along with the "Shadow Inventory" waiting in the wings?
What is clear to me is the housing market will remain fragile and won't be "Out-of-the-Woods" until the economy recovers enough to promote job growth. Unemployment remains the greatest challenge to a housing market barely off life-support. Although the official U.S. Unemployment Rate is at 9.5%, the broadest measure of unemployment, which includes discouraged workers and those underemployed, rose to 17.1% in April. As Real Estate professionals, how can we keep the housing market moving forward without government incentives until the employment picture improves enough to truly stabilize for the long-term?
We are already beginning to see a new round of incentives being created by Realtors and funded by home sellers. Realtors have moved quickly to replace the Tax Credit with new incentives to buy a home ranging from seller paid closing costs to new appliance packages to prepaid HOA fees. Even affordable home prices and historically low interest rates won't be enough to keep housing moving ahead until job growth occurs. Incentives will play a key role in home sales, just as it does in auto sales.
You know that old expression, "One Person's Junk is Another Person's Treasure"? Well, that applies to Buyer incentives as well. An incentive that attracts one buyer may not motivate another to purchase or select a particular home. Affordable home prices and low interest rates equate to a "Good Deal" for buyers. In a buyer's eyes, incentives can be the difference between a "Good Deal" and a "Great Deal". That's why you need to remain flexible with your incentives. Offer a choice of incentives to appeal to a broader segment of buyers. The more creative and flexible you are, the better chance you have of attracting buyers to your sellers' listing.
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