"Pending home sales plunged a seasonally adjusted 16% in November as a highly popular tax credit for first-time buyers was set to expire on Nov. 30, the National Association of Realtors reported Tuesday.The good news...
The pending sales index -- which measures contracts signed but not closed on previously owned homes -- was 15.5% higher than in November 2008. October's increase was revised higher to 3.9% from 3.7% previously reported.
The Bad News:
The tax credit was ultimately extended through the first half of 2010 and expanded to repeat buyers.Why bad? Well, besides another "pulling demand forward with taxpayer money" issue, without the revival of the tax credit, things would have been a lot worse. Not a good sign for the sustainability of the housing market.
Source: Realtor.org
Five months from the announcement of the extension to its (announced) expiry. You can't flip a house that fast. So buyers will only allow the $8K into their offers to the extent they believe houses are otherwise underpriced, since it would otherwise disappear from their equity. So not bad.
ReplyDeletethe # of sales have jumped since the announcement of the credit and size of the crash when the initial credit was set to expire (but didn't) shows that this was just pulling in those individuals that would likely have purchased a home anyways.
ReplyDeletethis either puts $8k in either the buyer or sellers pocket in the form of a discount for the buyer or an ability to sell for a higher amount for the seller. my view (and i understand not everyone agrees) is that when the credit subsides, prices will continue to decline to whatever level they would have anyway.
In the words of Ivan Drago in Rocky IV:
ReplyDelete"If he dies, he dies".
True dat.