According to RISMedia's article titled "What Impact Will Homebuyer Tax Credit Extension Have on Housing Industry?", not everyone believes the tax credit extension will be much help to a VERY fragile housing market recovery.
In case you hadn't heard, a Senate Committee passed legislation extending the $8,000 first time home buyer tax credit through April 30, 2010, and offering a new $6,500 tax credit to certain home buyers who are buying a replacement primary residence. Of course, the $6,500 tax credit comes with all kinds of strings - income limitations, have to have been in the existing home a minimum of five years, blah, blah, blah.
Skeptics think the timing of the tax credit extension means it will have less impact than some hope. There is no doubt that we are going into the traditionally slowest selling time of the year in real estate, the dreaded Thanksgiving - New Year's black hole. And first time buyers may feel they can just stop paying attention and wait until February or so to get back into the market. That's what I am afraid will happen. And if those first time buyers stop buying for the next several months, and the Area 10 numbers from yesterday are representative of the broader Richmond market....OUCH.
But what about this new $6,500 tax credit for buyers of a "new" primary residence? These are the elusive "move up buyers" that have been missing in this housing market "recovery." Sure, the lower price ranges - $200,000 and below - have shown robust sales growth, but the sales rate in price ranges above $200,000 have been either flat or even down substantially. What is supposed to happen in a healthy housing market is that first time home buyer buys a $200,000 house, and then THAT seller buys a $300,000 house, and then THAT seller buys a $450,000 house, and.... You get the drill. But the super weird thing about this market - those sellers in the first time home buyer price range, the guy or gal selling the $200,000 house, are quite often not buying ANYTHING.
But where are these sellers going? Anecdotally, they're renting. Or moving home. Or moving in with roommates, girlfriends, boyfriends. If they were lucky enough to have made some money on the sale of their home, they seem to be socking it away for a rainy day.
Why? I'm no economist, nor should I play one on TV, but I think it's the job market. I don't think there are too many people out there who feel secure in their jobs. Possible exceptions include medical professionals, educators, police/fire/EMTs, government workers. But I can't think of a lot of other fields that are employment-stable or growing right now.
I don't mean to be all doom-and-gloom. I'm hoping to be wrong, trust me. And maybe Congress will get smart and front-load BOTH tax credits, so each month they decrease by some set amount. That would encourage legitimate buyers, people who are going to buy anyway, to do it sooner rather than later. Unfortunately, my crystal ball is in the shop this week. But I'm all for cautious optimism.
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