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2009-09-29 22:08:02

Tax Credit Spurring First-Time Home Buyers!


Spurred by the federal $8,000 tax credit, first-time home buyers maintained their slim lead in sales activity over repeat and move-up buyers in the third quarter, according to HouseHunt’s  national survey of current market conditions. When investor purchases are factored in, the ratio is 52 - 48%.
Six months ago, first-time buyers outnumbered all other buyers two to one.
The random survey of member-agents also found that  existing homes are taking longer to sell, on average;  prices have fallen to 2001 levels in many metro areas,  and  affordability continues to  be the number one motivation for buyers.
Additionally, the National Association of Realtors (NAR)  reported that pending home sales have risen for six straight months and existing home sales had increased for four months in a row for the first time in five years. The national trade association  estimated that nearly two million first-time home buyers will have taken advantage of the federal  tax credit before it expires November 30.  Consumer confidence  jumped nearly five points in August before losing one point in September.
So, why isn’t the U.S. housing market in a greater recovery mode?
“The inventory of unsold homes is still too high, national unemployment is nearly 10% and climbing, credit is still tight and iffy, and the continuing decline in average home prices in many areas is squeezing owner equity out of existing homes, making repurchases difficult for sellers,” notes Michael Bearden, president and CEO of HouseHunt, Inc.  “Adjustable rate mortgage interest resets and a new wave of lender foreclosures expected this fall also dampens prospects of a quick market recovery. Short sales and bank REOs continue to exert downward pressure on prices.”
“On a more positive note,” Bearden said, “the stability of repeat and move-up buyers for the past three quarters is very good news for both buyers and sellers. So is the increase in consumer confidence because it measures spending attitudes on big ticket items, like houses and automobiles,” he said.
Also seeing improvement is Lawrence Yun, NAR chief economist, who said in a recent news release that the housing market has decisively turned for the better: “A combination of first-time buyers taking advantage of the housing stimulus tax credit and greatly improved affordability conditions are contributing to higher sales.”
“Because price-to-income ratios have fallen below historical trends, there are more all-cash offers. In some recovering markets like San Diego, Las Vegas, Phoenix and Orlando, the demand for foreclosed and lower priced homes has spiked, and a lack of inventory is becoming a common complaint,” Yun continued.
HouseHunt’s third quarter survey of  national current market conditions  also found:        
  • Average time on the market from listing to contract has lengthened. Twenty-two percent of respondents said sales are closing in 60 days or less, on average.
  • Inventories of unsold homes are shrinking slowly, 85%-15%. A year ago the ratio was 93%-7%.
  • Annual price appreciation is still heavily negative, 77%-23%.
  • In measuring ask vs. sale price ratios, 82% of  respondents reported  that their clients are getting 90% or more of their asking prices. Of this figure, 41% said their clients were getting 95% or more, on average.
  • Multiple offers are the same, with 60% saying yes they are receiving them and 40% saying no. (For details, see HouseHunt’s Quarterly Comparison Chart for 2008 and 2009
HouseHunt member-agents interviewed for this news article had mostly positive things to say about current business conditions in their communities, especially sales attributed to  first-time buyers taking advantage of the  federal tax credit.
Wende Landt of AmeriTeam Realty in Florida, exclusive HouseHunt member-agent for Orlando Southwest, said she has been getting a lot of first-time buyers trying to utilize the federal tax credit before it expires: “My market is definitely picking up. Lower end homes priced under $200,000  are selling quickly.  We’re getting multiple offers and buyer bidding wars again. It has been crazy!” Landt added: “Because of all of our short sales and foreclosures, financing and appraisals are our two biggest issues. We would welcome a more balanced market between buyers and sellers.”
David Olivares of Wiler and Associates Inc. Real Estate Services of McAllen, TX, exclusive HouseHunt member-agent for McAllen and a Texas Certified Affordable Housing Specialist, described his marketplace as very good, with more buyers than sellers. “Our listings usually close in 60 to 90 days. I work with a lot of first-time buyers, and most of them have already taken advantage of the federal tax credit.  I hope the deadline will be extended. That would be a blessing.”  Olivares’  biggest problem:  “Mortgage credit criteria needs to be a bit more lenient.  This would enable  buyers to buy something they   can afford but won’t make the process too difficult.”
John Dorris of John Dorris Real  Estate, exclusive HouseHunt member-agent in Visalia, CA, has a similar problem: “The federal tax credit brought out the buyers and they all wanted the tax credit.  I have multiple buyers for every property and need more inventory. The tax credit gave us a boost in business activity and  would certainly be  shame if it expires.” Dorris added: ”Homes priced under $200,000 are selling in 30 to 60 days, on average.. Eighty percent of my buyers fall into that category. Existing home prices have appreciated four percent, on average, in the past 90 days.”
Karen Matthews of Reece and Nichols, exclusive HouseHunt member-agent for Mission City, KS, in the Kansas City metro area, wants the tax credit to be extended and expanded:  “It would be awesome if the federal government would extend the tax credit for another year and include everyone, not just first-time-buyers. Financing is much tighter and getting first-time homebuyer loan approval has been difficult. Down payments are also difficult for some even though prices are down.” Average home price in Leawood is $150,000.  She described her marketplace as slowly improving and buyer activity increasing, with more buyers than sellers.
Scott Smith of Keller Williams, exclusive  HouseHunt member-agent for North Atlanta, GA, said  first-time buyers have an extra incentive to purchase a home this year because of an extra $1,800 tax credit from the state. “This is in addition to the $8,000 tax credit from the federal government,” he explained. “It has lighted a fire under their feet of potential buyers  to act a little quicker before time runs out.”  He said first-time buyers represent 40 to 50% of his business. “It’s still a buyer’s market here, with most activity in the $200,000 to $400,000 range. Our biggest problem is too many homes on the market. I used to show 25 to 30 homes to a buyer. Now it’s more like 50 to 60 homes. A reduction in inventory would certainly speed the housing recovery here.”
Finally, Derrick Guevremont of Counselor Realty, exclusive HouseHunt member-agent for Rochester, MN, reported lots of activity from first-time buyers taking advantage of the $8,000 tax credit – which he would like to see extended--  in addition to short sales and bank foreclosures: “Our biggest problem is unsold inventory. Average time on the market between listing and sale is 130 to 140 days, on average, even though we have seen an increase in market activity in the last 60 to 90 days.” He said sellers are getting at least 95% of their listing prices. Average home price is $150,000.
HouseHunt’s Bearden added:  “Our quarterly survey of HouseHunt member-agents across the U.S. has proven to be an accurate snapshot of what’s happening today in communities of all sizes and locations from data supplied by professional real estate agents working with thousands of customers in nearly every state. This valuable information is then made available free to homeowners, home buyers and home sellers through our website:” For additional information please contact Angelica Richardson at or by phone at 1-888- 832-2244.

Mike Bearden is President and CEO of HouseHunt, Inc. As one of the first real estate sites on the Internet, was founded in 1995 with the intention to provide unique information about every community in the United States. They also also provide the ability to search for active real estate listings and home values. HouseHunt allows one real estate agent to represent a community, ensuring that they are the exclusive provider of real estate services in any specific community.

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