Tax credits expanded late last year for first-time and repeat buyers are finally having a substantial effect on existing home sales, which registered 5.35 million units in March, up 6.8 percent from February – and a 16.1 percent increase compared to a year ago.
The figures from the National Association of Realtors represent the first sign that the tax credits, which expire April 30, have swayed the housing market. The first-time homebuyer credit prompted a big boost in October-November time frame before their initial deadline expired.
But housing market analysts had declared the second round of tax credits a failure. Fannie Mae said this week it expects total home sales for the first quarter to be much lower than projected, causing the home financing giant to revise downward, from 9 percent to 6 percent, its 2010 sales growth projection.
The question remains whether the surging sales activity will hold up past the tax credit deadline.
Total housing inventory at the end of March rose 1.5 percent to 3.58 million existing homes available for sale, which represents an 8-month supply at the current sales pace, down from an 8.5-month supply in February, the NAR said.
“With the tax credit pulling forward some sales into the first half of this year, we expect sales to pull back in the third quarter,” Fannie Mae said in an updated market analysis released this week.
First-time buyers purchased 44 percent of homes in March, up from 42 percent in February. Investors represented 19 percent of transactions, unchanged from February. The remaining sales were to repeat buyers.
“With the fast approaching April 30 deadline to get a contract in place for the tax credit, Realtors are working harder than ever to negotiate transactions, arrange services and complete paperwork,” said NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz.
Lawrence Yun, NAR chief economist, is more optimistic than Fannie Mae on the outlook in the upcoming post-tax credit period.
“With home values stabilizing, a revival in home buying confidence will likely help the housing market get back on its feet even as the tax credit impact disappears,” Yun said.
