Monday, November 16, 2009

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Economist says expansion will help more people buy, sell homes
By NANCY SARNOFF
HOUSTON CHRONICLE

The newly expanded federal tax credit for home buyers could be a shot in the arm for the Houston-area housing market.

The $8,000 incentive, which was set to expire Nov. 30, will now run through the end of April.

The new legislation also raises the income limits of those who qualify and allows current or recent homeowners to benefit, too.

“The net effect of the extension and expansion of the tax credit will help boost sales,” said Jim Gaines, an economist with the Texas A&M Real Estate Center.

How much, though, is hard to say.

The National Association of Realtors estimates 350,000 homes nationwide were sold to first-time buyers who probably wouldn't have bought without the credit. That's about 10 percent of the sales expected this year, Gaines said.

He estimates the market could be boosted by at least another 10 percent.

“The only reason I think it could be that much is because of the move-up or move-over buyer,” he said.

The expanded legislation, signed by the President Barack Obama last week, allows people who have owned a house for at least five consecutive years over the past eight to qualify for a credit of up to $6,500.

Vicki Fullerton, chair of the Houston Association of Realtors, sees another benefit to the new credit.

Not only will it allow current homeowners to buy something new, it also could help those relocating to Houston sell their homes in slower markets.

The credit applies to homes priced up to $800,000.

“In some of those other high-cost areas, getting the tax credit will help,” Fullerton said.
‘I can close whenever'

Joseph Bell isn't a move-up buyer, but he still has a good reason to be happy the credit was extended.

For the past two weeks, he's been scrambling to close on his new house before the deadline.

He didn't think it would take more than a month, but dealing with the bank, insurance company and real estate agent has been a lengthy process.

“Now it's not a big issue,” said Bell, 27. “I can close whenever, and honestly, the longer we delay everything, the more money I'll have for the down payment.”

Even with the broader requirements, the impact could be minimal.

The first iteration of the tax credit may already have brought everyone into the market who wanted to be there. “We may have grabbed a bunch of them that might have been buyers in 2010,” Gaines said.
‘Back on the fence'

Economic concerns are also creating uncertainty. Houston's jobless rate inched up to 8.5 percent in September.

“It's putting (buyers) back on the fence,” Fullerton said.

Still, the combination of low interest rates, affordable housing prices and the tax credit could make a “once-in-a-lifetime period” to buy, Gaines said.

Unless the tax credit brings in far more buyers than anticipated, prices aren't likely to see much change.

“Houston has always been a competitive market. Pricing will fluctuate like it always does, but I don't see it spiking or going down either,” said Steve VonHofe, division president of Taylor Morrison, which builds homes for a variety of prices around the Houston area.

VonHofe said more than 50 percent of sales have been stimulus-related.

“I can't say all those buyers wouldn't have bought, but they definitely took advantage of it,” he said.

nancy.sarnoff@chron.com


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