Is It Really Recovery Time?
October's figures are out for the Augusta-area, and lemme tell you - it's looking pretty darn good! The 1st Time Homebuyer Tax Credit has been extended and expanded, and it seems to be having an effect on our local market. Consider these sales totals:
| |
2008 |
2009 |
| September Sales |
414 homes |
431 homes |
| October Sales |
373 homes |
431 homes |
Although the Greater Augusta Association of Realtors (GAAR) Multiple Listing Service (MLS) does not provide data on how many of these sales involved 1st Time Homebuyers, it seems improbable for our numbers to have done better than last year WITHOUT some incentive stimulating sales.
C'mon Joe, Are We Really Coming Out of The Slump?
Here's the rub: according to application data from the Mortgage Bankers Association, actual purchase applications where down nationally 3.1% in October - even though interest rates decreased on average to 5.04% from 5.07%.
Another fact - despite good numbers for September and October, we remain down -6% on 2008's numbers (which where down 28% on 2007). Yes, we've gained ground, we started 2009 with a horrible January, down 24% on 2008 (in other words, down 52% on 2007), so being down six percent by October is an improvement.
Here's what I think: The tax credit was not extended (and expanded) until 5 November. Until that date, there where buyers scrambling to take advantage of the benefit before it expired on 30 November. Given how long it takes to close on a home when financed - we should expect November numbers to take a nice jump over last year as well. The reason being - most contracts for November closings where written in October (or earlier) - so those buyers believed when they wrote the contract - that the credit would expire.
Can I Get The Credit?
The credit was extended until 30 April 2009, and expanded to add "move up" buyers who have lived in their current home at least five years (yes, you have to sell that home and buy a more expensive one to get the credit).
If you're thinking of buying a home before the NEXT expiration date of 31 March 2010, see if you qualify by clicking this link:
Cheat Sheet for Tax Credit Qualification
Military, Intelligence and Foreign Service Benefits
One thing I do like about the changes, they add provisions that help our military men and women out. These benefits are also open to intelligence and foreign service personnel.
For example, someone who deploys for over 90 days (must be outside the U.S.) in 2010 will get an additional year (until 1 May 2011) to purchase a home and claim the tax credit.
There are additional benefits for these folks - including not having to pay back the credit if you have to move before the three-year occupancy deadline. You can read about them here:
Homebuyer Tax Credit - Armed Services Members, Others
What's Next?
The extension of the credit should inject some sales into the winter market. Remember - October-March are the slowest sales months of the year for real estate - people like to move while school's out and the weather's good.
The bottom line is that nationally, 1st Time Homebuyers accounted for only 36% of sales in 2006, and by some accounts they now account for almost 50% of all sales. It has provided a good "bump" for sales, but it is far from the cure.
The housing crisis has its roots in the mortgage industry and predatory lending. One required nothing more than a pulse to obtain a mortgage, and astounding products where rolled out to enable people to afford five times the home they should actually purchase. Adjustable Rate Mortgages, Alt-A products, and sub-prime loans all caused what we're now going through - not the lack of a "credit" for buying a home. There is a natural order to things - we over-built, over-bought, over-spent, and over-borrowed. Now we're spending less, borrowing less, and only buying essentials. Deplete the existing inventory through qualified buyers, and the market adjusts - back to another "Sellers Market."
Artificially inflating the market with a gallon of tax credit may help in the short run, but it is not the natural order of things. My milk has an expiration date, I'm glad the tax credit does too.