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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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Source: The L.A. Times

First-time buyers made up a bigger share of the housing market in 2009 than any other year on record, according to a study released this afternoon.

The number of first-time home buyers rose to 47% of all home sales from 41% of transactions in last year’s study, and was the highest on record dating back to 1981, according to the Washington-based National Assn. of Realtors.

Home sales have been fueled in recent months by cheap foreclosure properties. Both investors and first-time buyers have jumped into the market to snap up these heavily discounted digs.

For first-time buyers, one major incentive fueling the spree has been a tax credit extended last week by the Obama administration and expanded to include move-up buyers. The Realtors group lobbied heavily for the legislation. Paul Bishop, vice president of research for the Realtors group, said in a statement that several factors have been at play, including the tax incentives.

Many independent economists, however, contend that the credits are being given to people who would have bought anyway.

Of those first-time buyers, 55% purchased their home with a loan backed by the Federal Housing Administration.

That news comes on a day on which an independent audit of the FHA’s finances shows that its cash reserves have shrunk to a level below its legal limit, meaning that this pillar of the recent housing market upswing might need a taxpayer-funded bailout.

From the Washington Post:

The audit examined the excess cash the agency must set aside to deal with unexpected losses in its flagship home-buying program, which has played a key role in supporting the housing market.

As of Sept. 30, those reserves had an estimated value of $3.6 billion, a sharp drop from the $12.9 billion available a year earlier, the audit found. The current total represents 0.53 percent of all outstanding single-family-home loans insured by the FHA, well below the 2 percent portion set by law. This is the first time reserves have fallen under that threshold since 1994.

-- Alejandro Lazo

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By Steve Cook Real Estate Economy Watch

Just a week after President Obama signed into law an expanded homebuyers' tax credit for existing owners and a continuation of the credit for first-time buyers, home sales activity across the country is picking up even though we are entering a period when sales usually slow down as the holidays approach.

Reports from markets around the nation suggest that the ink on the President signature barely dried before first-time buyers jumped back into the market. Move up buyers, who have been frustrated for years by falling values and soaring inventories that have made it hard to sell their existing homes, are calling their real estate agents to find out if the new credit would provide enough assistance to get them out of their old home and into a new one.

In Gold Beach, on the south Oregon coast, there are 18 pending sales this November compared to zero pending sales a year ago. "Since the middle of September the real estate market has just exploded," said a local Realtor. "Most of the summer the homes that were being looked at were the homes around $200,000 where first-time buyers finally felt that the prices were low enough that they could finally afford a home.

In Washington State, Realtors across the state credited the first-time buyer tax credit, originally set to expire at the end of November. At a time of year that traditionally sees a drop-off in activity, the number of pending and closed sales have rebounded to late 2007 levels as the local market was already declining on the eve of a national recession.

In Iowa, Des Moines-area home sales rose nearly 39 percent in October, and local real estate leaders hope an expanded federal tax credit will drive sales beyond the first-time homebuyer market.

The new credits should help Iowa's housing market through the winter, the slowest time of the year for the Iowa real estate industry, said Brennan Buckley, an Iowa Realty spokesman. "We hope by spring, the economy will have picked up. I think we'll get a lot of move-up buyers who had been on the fence, especially when they look at where interest rates are compared to five years ago," Buckley said.

Erika Hansen, a Coldwell Banker Mid-America Group real estate agent, said she already sees homeowners reconsidering taking their homes off the market for winter. It should bring some needed inventory to the market, she told the Des Moines Register. "There's really not as much out there as people think," Hansen said.

Trisha Peters said it was a mixture of reasons - from family to a desire to change home styles - that prompted her to put her Des Moines home on the market. The tax credits made the decision easier. Peters expects her home will appeal to first-time buyers, and her $6,500 credit will help if she's unable to get what she paid for her condo.

"My home is worth less than it was two or three years ago, but the homes I'm looking at are priced lower, too. So, things even out. "It's really a perfect storm for buyers," said Peters, who added that low interest rates - now below 5 percent - were key in her decision. "That kind of good fortune doesn't usually happen to me," she told the Register.

In the resort community of Cape May, New Jersey, the first-time buyer credit has resulted in a clear up tick in sales of low to moderately priced homes within Cape May County, according to local Realtors. Now the problem slowing sales is the backlog of applications overloading lenders.

In the resort community of Wildwood Crest, New Jersey, many of the buyers who can afford to purchase first homes in the Crest fall outside the income bracket guidelines for the program.

"Everyone who hears about it at first says 'oh, great,' but then they realize they don't qualify," Cabrera told the Shore News Daily.

In Bakersfield, Calif., where more than half of mortgages are upside down, there is a limit to what the new tax credit can do for existing homeowners who want to step up, said Raul Rodriguez, a mortgage broker for Mary Cruz Realty in Bakersfield.

"Obviously they'd have to sell their old house before they could buy a new one, and a lot of people can't sell their homes right now," Rodriguez told the Bakersfield Californian.

Real estate broker-owner Nance Fillmore said both tax credits are critical to the Bakersfield area because much of the inventory here is lender-owned and was vandalized or neglected by the previous owner.

"This tax credit gives buyers some money to make repairs, or it creates a buffer zone for them to replenish the savings they used to make a purchase," she said.

Buyers have until April 30 to find a home if they want to qualify for the credits, which don't actually expire until June 30, leaving two months to close. The program is expected to cost about the $16.7 billion.

How many sales the two new credits will generate is anybody's guess. The 2009 first-time buyers' credit will added between 200,000 and 400,000 new sales that would not have taken place without the credit. Only 70 percent of existing buyers qualify for the new credit because of residency restrictions, according to a Goldman Sachs study, and many believe the only change in the first-time buyer credit, raising income limits, affects only 14 percent of first-timers and the extension of the credit will not motivate many others if they have not acted by now.

The impact of the existing buyer credit is even more difficult to assess. In addition to the problems facing many move-up buyers such as negative equity in their existing home and low resale prices, the credit is comparatively worth less to them than to first-time buyers.

A survey released last week by Campbell Communications/Inside Mortgage Finance found that the credit gives existing homeowners only half as much incentive to buy a home as first-time buyers. Because of the lesser value of the credit and the higher median price of move-up homes, the credit only accounts for two percent of the cost of an average move-up home as opposed to four percent of a first-time buyer's starter home, according to the study.


From Real Estate Economy Watch