First-Time Homebuyer Tax Credit Expires With Mixed Reviews
The deadline to sign contracts and qualify for the first-time homebuyer tax credit will expire tonight at midnight, but the credit's effect on the market is still up for debate. Buyers must sign a contract before midnight April 30 to get the $8,000 credit for first-time purchasers or a $6,500 credit for existing homeowners. Transactions must close June 30. “We definitely noticed a surge in buyer interest and increased urgency this week due to the expiration. Also had some last minute cash buyers from out of state, particularly the colder states of Michigan and Indiana,” said Rick Foxx, an REO broker with Foxx and Associates, based in Clearwater, Florida. Foxx said he doesn’t expect a huge fall in business after the deadline, but he did forecast a 10-20% spike in contracts this week. Buyer interest has been strong this spring, and anything under $150,000 is moving very fast, he said. “$150,000 also coincides nicely with our local median income and how that relates to the FHA loan amounts and qualifying ratios. In other words, people are buying what they can really afford based on proven income and assets - so it is a very sustainable group of purchasers,” Foxx said. Anthony Askowitz, an REO broker for RE/MAX Advance Realty II, also based in Florida, said his firm, too, was "very busy selling." While those on the ground are optimistic, some research firms aren’t. John Burns Real Estate Consulting said sales boomed last fall when the tax credit was set to expire in November, but sales in spring have not picked up nearly as much. “Our proprietary monthly survey and our weekly calls to our home building clients have confirmed that March and April were not good months. Not only do sales remain low, but also the traffic of interested shoppers is not improving,” according to the firm. “Despite the tremendous affordability that exists, we remain very cautious about the back half of 2010 because consumers just aren't showing much interest in home buying right now.” According to Scott Sambucci, a data analyst at Altos Research, sales could go down in April, but the effect of the tax credit will be elusive. “There’s going to be a negative impact on sales, but it won’t be as visible as people think. Transactions, especially if it’s a short sale will take months to complete, and by that time, late summer, early fall, things start slowing down anyway,” Sambucci said. Sambucci expects the market will begin to evolve accordingly without the government stimulus going forward. “Sellers may be expected by the buyers to make up that difference by taking $8,000 off the asking price or at least meet them half way,” Sambucci said. But, according to the Commerce Department’s Census Bureau and the Department of Housing and Urban Development (HUD), sales in March increased 26.9% from February -- fueled by the approaching deadline. That report followed an estimate from the National Association of Realtors (NAR), which showed a 6.8% increase over the same time period. Write to Jon Prior.