Winter storms had some impact, but a 7.6 percent drop in the pending home sales index for January from the National Association of Realtors indicates expanded and extended homebuyer tax credits are not bolstering the housing market.
The NAR index is based on contracts signed in January. It fell to 90.4 from an upwardly revised 97.8 in December. But it is 12.3 percent higher than January 2009 when it was at 80.5.
Lawrence Yun, NAR chief economist, said he expected some pullback from a surge in sales at the end of the year, but was surprised by the January decline.
“The sales figures are certainly disappointing,” Yun said. “I did not see this degree of loss in momentum.”
In November, the tax credit for first-time homebuyers – worth up to $8,000 for those eligible — was extended by five months until April 30, 2010. The credit can also be claimed if a binding contract before May 1, 2010 was signed to purchase the property before July 1, 2010.
But the program was also expanded for long-time current homeowners who can qualify for up to a $6,500 tax credit if certain conditions are met. The primary requirement is that a homeowner must have lived in the same home, which served as the primary residence, for a five-consecutive-year period in the eight years ending with the purchase of the new residence.
“January pending sales, though still higher than one year ago, remain much lower than expected given that a large number of potential buyers are eligible for the expanded home buyer tax credit,” Yun said. “Moreover, the abnormally severe and prolonged winter weather, which affected large regions of the U.S., hampered shopping activity in February.”
Yun said the NAR expects a surge in existing home sales in April, May and June if there is sufficient job creation.
“Housing can become self-sustaining with stable to modestly rising home prices because inventory has been trending downward,” Yun said.
NAR, one of the nation’s largest trade associations, represents 1.2 million members in residential and commercial real estate.
See an interview below with Lawrence Yun provided by the NAR:
[...] Homebuyer Tax Credits Fail to Spur Existing Home Sales … [...]
[...] Homebuyer Tax Credits Fail to Spur Existing Home Sales … [...]
[...] Homebuyer Tax Credits Fail to Spur Existing Home Sales … [...]
[...] Homebuyer Tax Credits Fail to Spur Existing Home Sales … [...]
While $8000 may make a substantial difference in some markets, it’s like those markets are also in very dire employment rate situations.
Generally speaking $8000 should not make or break a persons decision to purchase a home. This is not to say if you were considering to buy because your financials are in order that taking advantage of this credit is not a good thing. Of course you should look to save money where possible.
However if you were not able to afford a home or are unsure about whether or not you can afford one, an $8000 credit should not sway you toward buying a home.