First-Time Homebuyers Make Up Half of California Market: CAR
Of all homebuyers in California in 2009, 47% were first-time homebuyers, up from 35.9% in 2008, according to a report from the California Association of Realtors (CAR). And while new blood entered the market, real estate owned (REO) and short sales made up half of the assets sold in the state. It's the highest share of the market first-time homebuyers took since 1995. Back in November, President Barack Obama extended the first-time homebuyer tax credit, which was originally set to expire on Dec. 1, 2009, to April 30, 2010. Under the extension, first-time buyers can claim 10% of the purchase price, up to $8,000 for single or married taxpayers filing jointly. “It is clear that the federal tax credit for home buyers worked well in 2009 and is continuing to drive home sales,” said Steve Goddard, president of CAR. “The home buyers’ tax credit is arguably the most successful strategy employed by the government’s efforts to stimulate the economy.” Of those surveyed by CAR, 40% of the homebuyers said they would not have purchased a home without the credit. Nearly 70% of those surveyed said the credit was either “very important” or “most important” in their decision to buy a home. REO and short sales took up nearly half of all market activity in 2009, up from 35.6% in 2008, according to the CAR report. As a result, the median sales price of distressed property dropped almost 25% to $250,000 in 2009 – down from $330,000 in 2008. The California market continues to condense toward Federal Housing Administration (FHA)-insured loans in 2009. For the year, those loans took up 32% of the market compared to 18.9% in 2008, according to CAR. The rise could have come when the FHA raised its cap from $362,790 to $729,750. According to some, the tax credit isn’t a stimulus; it’s a crutch. “[T]he housing market is likely to falter once the tax credit expires this spring, leading to a double-dip in prices,” said Paul Dales, the senior US economist at Capital Economics. An executive of a regional homebuilder in the Southwest told HousingWire that business will drop once the tax credit expires but expects, and is hopeful for, an extension. Write to Jon Prior.