March was a month that took many real estate professionals by surprise. According to Austin Kilgore with Housing Wire, national housing sales rose 6.8% over February’s sales. The New York Times reported that the Western Region of the country did exceptionally well as sales rose 17%. Standard & Poor’s Case-Shiller Home Price Indices came out this week and showed that the overall home prices were up in the month of February.However, a report in Agent Genius Magazine says, “Where it gets mixed up is that despite this being the first time since 2006 that the annual rates of change for both [the 10-city and 20-city] composites are positive, more than half of the cities in the larger composite experienced price declines.”
Real estate professionals are speculating this recent uptick in sales is greatly due in part to the federal home buyer tax credit that expires at the end of April 2010. Prospective home buyers are moving off the sidelines to cash in on the low interest rates and potential $8,000-$6,500 tax incentive ending soon. However, Alan Ziebler reports “doubts remain about whether the momentum will be sustained in the second half of the year when federal support is gone.”
States such as California, are initiating their own home buyer’s tax credit in an attempt to maintain the momentum of residential real estate sales. According to the California Franchise Tax Board, “These tax credits are limited to the lesser of 5 percent of the purchase price or $10,000 for a qualified principal residence.” Though this incentive can provide eligible home buyers more than the federal tax credit, the California state tax credit will not last forever and is scheduled to end on August 1, 2011.
Obviously, there is a short window where buyers can capitalize on some real estate deals that probably won’t present themselves for several decades to come. Interest rates are at record lows and tax credits are offering those in a financial pinch a lot of help. The real estate market is overstocked with a supply of REO’s and short sales just waiting to get off the bank’s books. With so many factors piling up in the buyer’s favor, what else would it take to get more buyers to move forward with purchasing in the market?
Will the market continue its gradual stablization or will the real estate market take a double-dip once the government stops offering incentives? What are some of your market thoughts and speculations?