There is so much mixed news about the economy and the housing market. New home sales have hit a new low, mortgage applications are down, yet prices have stabilized at least here in the metro area. The number of foreclosures has gone down from last year but the common wisdom is that many more foreclosures are in the pipe line as millions nation wide are behind on payments.
It is all confusing but I think we are in a recession and it will have it's ups and downs until we work our way out of it and work is the key. No one really knows when a recession is over until it has been over for a few months. More jobs will make a difference.
With all of that said I am not at all surprised at the news that the Move-up tax credit kind of plopped. The credit is for $6500 and is for those who have lived in their home for five consecutive years out of the last eight years. Every time I meet with potential sellers I mention the tax credit. So far no one has gotten all excited about it and I don't think anyone is selling their home because of it.
None of my current sellers are eligible for it because they have either been renting out their homes or have not owned them for five years. People who don't have jobs are not planning on moving either so the higher than average unemployment rate is also responsible for a smaller pool of move up buyers. Add in the fact that many moved up during the years of rapid appreciation, easy financing and quick sales the pool of move up buyers is even smaller.
Enthusiasm for the first time home buyer credit is waning. Buyers this year are taking a more practical approach. They realize that hurrying to buy because of a tax credit may be short sited. Don't get me wrong there are those who are taking full advantage of it just like last year and the people who take advantage of it this year are ready to buy with or without the tax credit. The first time credit will expire at the end of April so I will go ahead and predict that home sales will be stronger in the first quarter of this year than in the other three quarters.
I’m seeing quite the opposite. I have one seller that is definitely looking to cash in on the tax credit and I’d say 6 out of 8 buyers that are highly motivated by the credit. Of those, I’d say 3 of those 7 wouldn’t purchase without the credits.
Three of my sellers have not lived in their homes for five of the last 8 years. In two cases they have been renting the property. There are many like that in the twin cities. Of my buyers there is one couple who can’t take advantage of the first time buyer credit because they sold a home two years ago. I also have buyers who are trying to beat the deadline but all of them were ready to buy anyway. I guess Minneapolis area buyers and sellers are not the same as those in St.Paul. We like to say real estate is local and it really is. I have looked at pending sales and if I go back six weeks they are lower than average. Also there is an article on CNN money about how the move up credit isn’t doing much so I guess I am not the only one seeing this.
T – The credits were all ploys to get people hyped up about buying a home, but left so much of the home-buying population out that it was of little use. Your experiences, and that of most other people I know in the business, are proof positive that the powers that be forgot to actually think before they passed their legislation . . . whoops!
Funny, but I have been noticing the same thing…buyers just have very little interest in becoming an “upgrade” buyer. I live in Jupiter, Florida and have had a lot more first time homebuyers who are trying to cash in on the $8,000 cash credit, but no interest in the $6,500 “upgrade” tax credit.
I guess they feel they will make better gains in the market on their own terms??