Sunday, June 6, 2010

Tax credits be gone.....

What happened in the rest of the country when the tax credits went away? A big drop in sales is what happened. California managed to buck the trend because of the new $10k state tax credit. But this too will expire and then what. It help keep the market moving for another few months and then what. It's already been proven that all these credits do is bring sales forward. People that might rather buy next year will buy this year to get that free money (I would too).

From the WSJ

How will housing sales fare without the benefit of big tax breaks for home buyers? The early indications are that sales are down very sharply in recent weeks, worse than most brokers and analysts expected.

Of course, economists and real estate analysts expected home sales to slow after the tax credit, of as much as $8,000, expired at the end of April. But early data from real estate brokers indicate that the sales declined as much as 25% to 30 from the year-earlier levels in some markets.

Without the tax bait, “consumers just don’t have that same sense they have to move quickly,” said Patrick Lashinsky, CEO of ZipRealty Inc., a big brokerage firm.

The May slump is ominous, but it’s too early to tell whether it portends another serious downward lurch in a market that has generally been leveling off over the past year.

Despite the recent drop in mortgage rates to less than 5%, applications for home-purchase mortgages have fallen in each of the last four weeks. In late May they were down nearly 40% from a month before, reaching their lowest level in 13 years, according to the Mortgage Bankers Association.

Even the Realtors are acknowledging that things look dicey. Lawrence Yun, chief economist for the National Association of Realtors, estimated that contracts signed for home resales in May were down 20% to 30% from a year earlier. He expects June and July to remain fairly weak and will be watching nervously for signs of a rebound in August or September. “Housing cannot just depend on [government] stimulus forever,” Mr. Yun said.

Home-purchase contracts signed in New Jersey last month were down 25% from a year earlier, estimates Otteau Valuation Group, an appraisal firm in East Brunswick, N.J. New Jersey’s state legislature is considering its own tax credit for home buyers.

In the Minneapolis area, the number of newly signed home-purchase contracts in the week ended May 22 was down 30% from a year earlier, according to the Minneapolis Area Association of Realtors. “Our buyers, if they haven’t purchased, have just decided to wait,” said Brad Fisher, president of the local Realtor group.

In the Phoenix area, contracts signed in May plunged 26% from a year earlier, local Realtor data show. In Denver, the drop was 27%. Northwest Multiple Listing Service, which covers 21 counties in Washington state, including the Seattle area, reported Friday that contracts signed in May also were down 27% in its region.

In another sign of weak sales, the number of homes on the market is growing again. ZipRealty said the number of homes listed for sale in 26 major metro areas across the U.S. in May was up 1.7% from April. In a typical May, the inventory doesn’t increase from April, according to Ivy Zelman, chief executive of Zelman & Associates, a research firm.

California’s state tax credit of as much as $10,000, which ends Dec. 31, has helped sustain sales there. Contracts signed in May in the Los Angeles region were up 16% from a year earlier (but down 9% from April), while San Diego was down 3% from year-ago levels. San Francisco’s East Bay was up 2%, while the Napa Valley region posted a 15% gain from one year ago (but a 14% month-over-month decline).


Jay & Christina said...

While the $10K tax credit is scheduled to last the rest of this year, the funds are expected to run out by the end of June. Over 50% of the money is already spoken for. You can keep an eye on what remains of the fund here:

Do you think the CA gov will allocate/borrow more money they don't have to continue this giveaway into December?

Lisa said...

The expiration of the tax credit is indeed a challenge to real estate and mortgage brokers, as well as home resellers. People can't be set anymore to buy properties at this point in time because there's nothing advantageous for them to stimulate their mood to purchase. Maybe brokers should come up with more flexible mortgage payment plans for clients to grab. Home resellers, on the other hand, could modify their homes' existing design to cater to what home buyers want.

When I was doing a reselling on my nearly-foreclosed house and found this buyer who wants a minimalist space for the home's interior, I went to Fort Worth furniture store for some purchases of living room furniture (Dallas, TX). I bought an easton leather sectional and added some children's furniture (Dallas, TX) for the kids' room. Though the house's look was totally altered, the revamp was good and I managed to sell the house at a more favorable price.