First-Time Homebuyer Credit Continues to Drive Home Sales
Sales of existing U.S. home sales rose for the seventh time in eight months in October, largely spurred by the first-time homebuyer tax credit, according to the National Association of Realtors.
“Many buyers have been rushing to beat the deadline for the first-time buyer tax credit that was scheduled to expire at the end of this month, and similarly robust sales may be occurring in November,” said NAR chief economist Lawrence Yun. “With such a sale spike, a measurable decline should be anticipated in December and early next year before another surge in spring and early summer.”
Sales were up 10.1 percent in October from September to a seasonally adjusted pace of 6.10 million homes. The latest figure is also up 23.5 percent from October 2008. Sales have not reached this height since February 2007.
The mortgage market has two things going for it at this point. First, the tax credit has been extended and expanded with a new deadline of April 30.
“There is still a large pent-up demand that can be tapped before the tax credit expires. Our recent consumer survey further shows that 13 percent of successful first-time buyers had a previous contract that was cancelled or fell through – there likely are many more buyers who were attempting to purchase but simply ran out of time,” Yun said.
The second highlight is that mortgage interest rates have remained incredibly low during the past year, hovering right around 5 percent.
Some bad news for borrowers is that the inventory of existing homes, particularly in the low end, is starting to be whittled down. Total inventory fell in October to 3.57 million units, a 3.7 percent drop from September. At the current sales pace, that represents a 7.0 month supply.
“The supply of homes on the market is now at the lowest level in over two-and-a half years – we’re getting closer to a general balance between buyers and sellers,” Yun said.
So even though thousands of additional foreclosures are predicted on the horizon, for those who can and want to buy, conditions are pretty ideal to jump in now!
Amber Nelson on November 23rd 2009 in Home Buying, Interest Rates, Mortgage News
Evan responded on 24 Nov 2009 at 5:45 am #
Ah!!! I found what I was looking for. Somtimes it takes so much effort to find even tiny useful piece of information.
Nice post. Thanks
Kevin Benner responded on 24 Nov 2009 at 1:56 pm #
My fear is that once the government starts to pull back on some of these programs we will still be left with high unemployment and a steady stream of foreclosures that will tamper down on any increase in the real estate market. I look at this similar to the cash for clunkers and its effect on car sales. While the program was running sales went through the roof but as soon as the program ended sales fell.
Marcus responded on 25 Nov 2009 at 2:37 pm #
I don’t see this being that similar to cash for clunkers. cash for clunkers had a very short window. People jumped in to take advantage that had no intentions of buying a new car if the program had not been launched. On the other hand the home buyer tax credit has swayed some individuals that were previously on the fence about buying a home to take the plunge, but it hasn’t grabbed people that otherwise wouldn’t have considered buying.