With fewer than three and a half months left to close on a home before the $8000 first-time homebuyer tax credit expires, field reports suggest that a surge in sales is already underway and will drive sales up over the next two months.
The size of the surge will be the best indicator yet of the credit’s ability to motivate buyers to get off the sidelines and it could become a major argument for keeping and extending the credit another year. The National Association of Realtors projects 350,000 additional first-time buyers will own homes thanks to the tax credit’
Real estate companies are mounting major marketing campaigns to let buyers know they are running out of time, and they are none too soon. It takes an average of ten weeks for buyer to find a home today, according to NAR’s 2008 Profile of Home Buyers and Sellers, and another one to three months to close on an existing home. Confusion and controversy caused by the Home Valuation Code of Conduct is delaying appraisals in some areas and changes in the Truth in Lending Act taking effect this month can cause delays in securing financing.
Signs of the surge:
- The Internal Revenue Service reports that at least 1.1 million buyers have applied for tax credits through amended returns. More are expected when income taxes are due in April.
- Houston area loan officers say they’ve seen applications increase by 50 percent, but not everyone is getting approved. “The buyers are out there and they are looking,” one told KHOU news.
- In Illinois, total home sales (which include single-family and condominiums) increased by 61.8 percent in the second quarter of 2009 to 27,531 homes sold compared to 17,017 homes sold in the first quarter of 2009. Sales were down 16.4 percent from second quarter 2008 sales of 32,949. “More first-time buyers are taking advantage of the federal tax credit while distressed properties prolong the downward pressure on prices,” said Pat Callan, president of the Illinois Association of REALTORS(R).
- In Ithaca, New York , in the first half sales were down 17 percent from last year, but in June – There were 96 closings that month, down only four from the same time last year, and the median selling price was actually up slightly, from $181,675 in June 2008 to $185,550 in June 2009.
- In Dallas, real estate agents sold 7,127 single-family homes in July, the highest sales total in 11 months. The number of pending home sales – a leading indicator – is up 5 percent from a year ago. Local Realtors credit the federal tax credit.
- Lane County, Oregon home sales were up 11 percent in July compared with a year ago. And they increased by 13 percent from June to July this year, with about 40 more homes sold. The seasonal jump this year was higher than it has been for a decade. Moreover, sales are concentrated on the lower end of the market, where first-time homebuyers have been lured into the market by the $8,000 federal tax credit.
- Finally, perhaps it’s a sign of success of sorts that Illicit use of the credit is keeping the IRS busy. It already has 24 criminal investigations of suspected fraud under way around the country. It has executed seven search warrants and last month a tax preparer in Florida entered a guilty plea on federal charges of fraud in connection with the first-time buyer credit. He’s awaiting sentencing and faces up to three years in prison, a $250,000 fine, or both.
As builders, real estate agents, lenders and closing vendors rush to get their customers to the courthouse in time, what can they expect after December 1? Tine is running out on both the credit-and efforts to extend it.