In these economic times most people are
shopping for the best deal they can find. They are looking for items
that they need or want when they go on sale. When Macy’s has a sale,
people show up to take advantage of high quality items that are offered
at a lower price. Not only can you buy clothes, computers, cameras, etc.
on sale, but you can now buy a house on sale. As you look for houses on
the various websites and on the multiple listing service, it probably
won’t have a big SALE sign on it, but it probably is on sale. I
am not saying FOR SALE. I am saying
ON SALE. Now that the Federal Tax Credit program has
ended you may feel that you missed out on a great bargain. That is not
necessarily true because all those sellers whose houses did not sell
during that period are anxious to get their houses sold now. They
usually won’t tell you that their house is on sale in so many words but
there are indicators if you know what to look for.
In order to take advantage of these bargain deals, it is important to
have a good credit history. Paying your bills on time every month is the
easiest way to maintain good credit and get the best mortgage rate. If
you are unsure of what your credit looks like, you can get a report for
free once each year. Go to
www.annualcreditreport.com/cra/index. There is absolutely no charge
and no pressure to buy anything as a result of obtaining your credit
information.
Buying or selling in this market takes know-how. Let my 20+ years of
experience work for you. Let me show you how to find homes that are “on
sale”.
Washington, January 05, 2010
Contract activity for pending home sales fell after a surge of
activity in preceding months to beat the original deadline for the
first-time home buyer tax credit but remains comfortably above a
year ago, according to the National Association of Realtors®.
The
Pending Home Sales Index,* a forward-looking indicator based on
contracts signed in November, fell 16.0 percent to 96.0 from an
upwardly revised 114.3 in October, but is 15.5 percent higher than
November 2008 when it was 83.1.
Lawrence Yun, NAR chief economist, said a drop was expected. “It
will be at least early spring before we see notable gains in sales
activity as home buyers respond to the recently extended and
expanded tax credit,” he said. “The fact that pending home sales are
comfortably above year-ago levels shows the market has gained
sufficient momentum on its own. We expect another surge in the
spring as more home buyers take advantage of affordable housing
conditions before the tax credit expires.”
Buyers who have a contract in place to purchase a primary
residence by April 30, 2010, have until June 30, 2010, to finalize
the transaction to qualify for the tax credit of up to $8,000 for
first-time buyers and $6,500 for repeat buyers.
The PHSI in the Northeast dropped 25.7 percent to 74.4 in
November but is 14.7 percent above a year ago. In the Midwest the
index fell 25.7 percent to 82.0 but is 9.2 percent higher than
November 2008. Pending home sales in the South fell 15.0 percent to
an index of 97.8, but are 14.7 percent higher than a year ago. In
the West the index declined 2.7 percent to 124.6 but is 21.4 percent
above November 2008.
Yun projects an additional 900,000 first-time buyers will qualify
for the extended tax credit in addition to about 2 million who have
already purchased; 1.5 million repeat buyers also are expected to
benefit from the credit.
“Many trade-up buyers, who have historically timed their purchase
based on school-year considerations, will have to accelerate their
buying plans if they need the tax credit to make a trade,” Yun said.
Repeat buyers do not have to sell their existing home to qualify for
the credit, but they must occupy the home they buy as their primary
residence.
Yun added that mortgage interest rates cannot remain at
rock-bottom levels for a sustained period and will likely inch
higher in 2010. But the tax credit impact in the first half of the
year and expected job growth impact in the second half will support
home buying activity and absorb enough inventory to bring a rough
balance between buyers and sellers. Home prices are expected to
stabilize or even modestly rise as a result in 2010.
The National Association of Realtors®, “The Voice for Real
Estate,” is America’s largest trade association, representing 1.2
million members involved in all aspects of the residential and
commercial real estate industries.
*The Pending Home Sales Index is a leading indicator for the
housing sector, based on pending sales of existing homes. A sale is
listed as pending when the contract has been signed but the
transaction has not closed, though the sale usually is finalized
within one or two months of signing.
The index is based on a large national sample, typically
representing about 20 percent of transactions for existing-home
sales. In developing the model for the index, it was demonstrated
that the level of monthly sales-contract activity from 2001 through
2004 parallels the level of closed existing-home sales in the
following two months. There is a closer relationship between annual
index changes (from the same month a year earlier) and year-ago
changes in sales performance than with month-to-month comparisons.
An index of 100 is equal to the average level of contract
activity during 2001, which was the first year to be examined as
well as the first of five consecutive record years for existing-home
sales.
Existing-home sales for December will be reported January 25 and
the next Pending Home Sales Index will be on February 2; release
times are 10 a.m. EST.
As the real estate market continues to languish, and prices continue to
drop I don't see the government doing much to help. The politicians keep
talking about doing something to help those that are in danger of losing
their homes to foreclosure but even that seems to be going nowhere. I
believe the solution is developing programs that will stimulate buying.
Once that happens, prices will stop dropping and there will be fewer
foreclosures because home owners will be able to sell their homes. The
$7,500 tax credit program that the politicians created was pretty much
useless, as evidenced by the lack of interest in it. The new $8,000 tax
credit is more beneficial since the buyer does not need to pay it back
if they stay in the house for 36 months. Low interest rates are great
but if the buyers can't afford the down payment, closing costs, and
yearly property taxes, low home prices and low interest rates still do
not get the market moving. Since the Tax Credit program expires on
November 30th and the recovery is still slow, Congress needs to extend
the program for at least another 6 months. If they extend it any longer
than that the effects of the incentive will take longer to be realized.
We are going into the slowest time of the year for real estate sales so
this is when the program can have the most benefit to the economy.
I know that local and state governments rely heavily on transfer taxes
and property taxes to fund their various programs, but at some point
they have to realize that they have pushed those taxes over the limit.
People can no longer afford to buy or keep the homes they own. We are
now at a point where the housing market has almost come to a stop and
the government is taking in less revenue as a result. Local
municipalities think that the solution is to reassess the home values
higher (resulting in higher taxes) and that will solve their revenue problem. In fact, it does just
the opposite. Houses become even harder to sell, foreclosures go up as a
result of the high property taxes, and the downward cycle continues. The
greed and wasteful spending programs of government have forced them to
continue to find new and creative ways to increase revenue. The result
is what we are seeing now in all facets of our economy.
So what is the solution? History has shown over and over again that
lowering taxes actually generates more revenue as a result of increased
market activity. If the federal government truly wants to get the
housing market moving again it must provide the states and local
governments incentives to reduce the tax burden on homeowners and home
buyers. This could come in the form of payments directly to the states
for each home sale or direct payments to the home buyer. The Downpayment
Assistance Programs that were eliminated recently should be reinstated,
with some strict credit score criteria. This program allowed the seller
to contribute to a nonprofit organization that would then provide a
portion to the home buyer for down payments. When used properly, the DPA
costs the government nothing and provides the critical downpayment help
that can help get the home buying/selling moving again. Another approach
would be to eliminate the restriction on the amount that the seller can
contribute to the buyer's closing assistance. Elimination of the
restriction or reinstatement of the DPA could be tied to the buyers'
credit scores. A higher score would allow a higher downpayment
contribution from the seller. The problem many potential buyers have is
not their ability to meet the monthly mortgage payment. Rather it is the
ability to come up with the outrageous downpayment and closing costs.
Here in Maryland we have some of the highest closing costs in the
nation.
The high closing costs and high property taxes are continuing to inhibit
a positive housing market. Until this issue is properly addressed, I
just don't see a recovery happening in the housing industry. On the other hand, if this
problem can be solved, the housing sector can lead the nation out of the
severe economic slowdown we now find ourselves in.
