September 1st, 2009 1:45 PM by Preston Ware
The national association of Realtors reported Friday that pending home sales rose 3.2% in July. This is great news because expectations were set at 2% and this now makes six months in a row in which pending home contracts have increased. This is the first time we have had such a streak in the eight year history of the Case-Shiller index. Many believe that the enthusiasm is being fueled by the $8000 First Time Homebuyer income tax credit that is set to expire on Dec 1st, 2009.
Washington is already talking about extending the credit, some want to take it one step further. The Home Ownership Moves the Economy (HOME) Act of 2009, introduced by Howard Coble (R-NC) would continue the availability of the credit into 2010 and allow all home buyers to take advantage of the program. This makes sense.
A first time homebuyer is someone who has not owned a home in three years or more. It doesn’t mean that you can be a 1st Time Homebuyer only once in your life. You can be considered a first time home buyer if you owned, then rented for three years and a day, then purchased again. In Florida we talked about real estate tax portability as a way of increasing home sales. This would allow homeowners to hold on to their low real estate tax bill. Residents, who enjoyed low tax bills for many years, could then move around the state, move closer to a job or family members or the beach without getting hit with an enormous increase in payment. Wouldn’t making the $8000 credit available to everyone have somewhat of the same effect in the short term? Our present incentive is mainly helping the younger upwardly mobile customers. Why not open this incentive up to everyone so other demographics can slip into something a little more comfortable.
Last year, for the first time in 60 years the population of Florida dropped. It dropped by approximately 58,000 people due to an ailing economy that misses its construction and tourism industries. Younger demographics are fleeing the state to go find a job. Older demographics are staying put elsewhere, (e.g. New York and New Jersey), afraid to make a move. Why not give an incentive back to seniors from all over the country to move into that condo on the shore which is at historically low prices.
An associate of mine mentioned an interesting thought to me the other day. He said that he thought the banks were watching the supply of foreclosures and holding back their inventory. Instead of flooding the market with a glut of foreclosed homes, they were monitoring the availability so that the ones out there are getting snatched up. Demand goes up for those few homes and eventually price. Others have said that the recent increase in the Case-Shiller Home Price Index is due to the mix of the homes being sold. Less distressed properties and more regular sales help boost the averages.
Expectations are that the first time homebuyer tax incentive will be extended in some shape of form. The most difficult time to sell a home is during the winter. Letting the expiration happen on December 1st, 2009 would throw a huge wrench into all of this momentum we are starting to see. I am banking that someone in Washington knows this. Hope so.
Written by Preston Ware of First South MortgageTel: 704-542-8057http://www.prestonware.comEmail is email@example.com.