Home buyer credit extension heads to Obama Congress passed a bill this week extending the deadline to close escrow and qualify for the federal home buyers tax credit. President Obama is expected to sign the bill extending the deadline to Sept. 30, 2010, instead of its original June 30 deadline.
KEEP THIS IN MIND
• The bill extends the deadline to close escrow for home buyers who entered into a home purchase contract by the April 30 deadline. First-time buyers may be eligible to receive up to $8,000 and qualified existing homeowners may receive up to $6,500 if the home buyer closes escrow by Sept. 30.
• Home buyers entering into sales contracts May 1 or later are not eligible for the federal tax credit, but they may qualify for the California home buyer tax credit.
• The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) and the NATIONAL ASSOCIATION OF REALTORS® worked closely with members of Congress to extend the deadline. Estimates from NAR show nearly 180,000 home buyers nationwide would have missed out on the tax credit if the deadline was not extended, including nearly 17,700 home buyers in California.
• Many of the home buyers who would have missed out on the tax credit are in the midst of purchasing a short sale or foreclosure, which generally take longer to close due to the amount of paperwork involved in the transaction.
Two top housing economists provided some encouraging news about the housing market during an economic session at the NAR Midyear Legislative Meetings and Expo this week. Both NAR chief economist Lawrence Yun and Moody’s Economy.com chief economist Mark Zandi agree that job creation is the key to a sustained economic and housing recovery, with job creation expected later this year, but they differed on their views about how foreclosures will impact home prices.
Yun says the homebuyer tax credit added 1 million buyers, reduced inventory by 1 million units and reduced the housing supply by several months, which corresponded to a positive impact on home prices of 5 percent to 8 percent. “Stabilizing home prices will limit future foreclosures,” says Yun. He predicts slightly stronger demand for housing and a fairly even level of foreclosures entering the pipeline this year before easing in 2011. “We expect distressed sales to account for 30 to 40 percent of transactions for the remainder of this year,” he says.
Zandi also forecasts improved demand for housing, but expects foreclosures to rise later this year before easing in 2011. He also says home prices may weaken further. “There will be no real price growth in 2010 or 2011. Whether home prices weaken is unclear, but it will take two more years to work off excess housing inventory at the current sales pace. Of course, if demand picks up, it would take less time for prices to rise,” Zandi says.
from CRS Member Connect newsletter
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in March but not closed, rose 5.3 percent from the previous month and was 21.1 percent higher than March 2009, NAR reports. This follows an 8.3 percent monthly increase in February.
NAR chief economist Lawrence Yun says the rise in pending home sales is a result of better housing affordability and the homebuyer tax credit, but he expects sales to decline in the months ahead following the expiration of the tax credit. “Clearly the homebuyer tax credit has helped stabilize the market. In the months immediately following the expiration of the tax credit, we expect measurably lower sales. Later in the second half of the year and into 2011, home sales will likely become self-sustaining if the economy can add jobs at a respectable pace and from a return of buyer demand as they see home values stabilizing,” Yun says.
The index rose in three of the four regions from February to March, and all four regions year-over-year. In the Midwest, it increased 1.2 percent in March from the previous month and was 18.5 percent higher than a year ago. In the South, the index jumped 12.7 percent in March and was 28.3 percent higher than March 2009. Pending sales in the West rose 1.9 percent during the month and were 8.8 percent above a year ago. But pending sales in the Northeast declined 3.3 percent in March, although they were 27.2 percent higher than a year ago.
The pace of existing-home sales in November rose a substantial 7.4 percent, cintinuing a string of solid increases in the closing months of 2009. Looking ahead, sales are expected to ease, with households, no longer concerned about the popular home buyer tax credit immediately expiring, taking longer to buy. NAR’s forward-looking pending home sales idex shows a 16 percent drop in closings in November. Sales should pick up again as the tax credit wids down in mid 2010.
information from NAR’s Realtor magazine -Feb. 2010
Pending home sales rose slightly in December, increasing 1.0 percent from the previous month, according to NAR. The Pending Home Sales Index (PHSI) was 10.9 percent above December 2008. In November, the index had fallen 16.4 percent after several months of surging activity.
The index in the Northeast rose 2.3 percent in December and was 14.9 percent higher than December 2008. In the Midwest, the index increased 5.2 percent and was 8.7 percent higher than a year ago. In the South, pending home sales rose 2.2 percent and were 5.5 percent higher than December 2008. In the West, the index fell 3.8 percent but was 18.6 percent above a year ago.
NAR chief economist Lawrence Yun says it’s important to recognize how the tax credit is skewing market data. “There are easily understood swings in contact activity as buyers respond to a tax credit that was expiring and was then extended and expanded. These swings are masking the underlying trend, which is a broad improvement over year-ago levels. December activity was the fifth highest monthly tally in two years,” Yun says.
from CRS Member Connect newsletter
for additional information go to my Real Estate Market Weekly Update Webcast: http://realtytimes.com/REUv/BrianRipp
National Association of Realtors estimates that the federal government’s economic stimulus plan, along with lower interest rates and other mortgage relief measures, could help trigger 900,000 additional home sales in 2009, compared with conditions in the absence of the stimulus package. The association also expects home inventory to fall below an 8-month supply by the end of the year.
Brian Ripp, CRS, GRI, Broker – your Bay Area Realtor, since 1985
www.BrianRipp.com serving Fremont, Newark, Union City & surrounding communities. Real Estate & Property Management.
Real Estate Market Weekly Update Webcast: http://realtytimes.com/REUv/BrianRipp
