What's Next For Housing, After Buyer Tax Credit Expires?
by: David Pitman, April 12, 2010 7:04:00 am
The Internal Revenue Service says more than 165,000 Texans have taken advantage of the home buyer tax credit, so far claiming $1.2 billion. Those numbers are expected to grow as the deadline for the credit approaches.
It's impossible to say how many of those buyers are in the Houston area, because the IRS doesn't break down the tax credit numbers by city. And the Houston Association of Realtors says it has not been counting how many buyers cited the credit as the main reason for taking the plunge.
But, HAR chair Margie Dorrance says recent conversations she's had with local lenders seem to support the idea that people around here are rushing to get the credit while they can.
"I asked them if they could tell me about how much of the business they did this past month they would attribute to the first-time homebuyer tax credit. And, honestly, they told me they thought it was between 50 and 60 percent, maybe as high as 65 percent for some of them."
The home buyer tax credit came with last year's economic stimulus package. It was originally set to expire last November. But lawmakers extended the deadline and expanded the credit to cover people who already own a home, along with first-time buyers. Dorrance says would-be buyers have just a little more than two weeks to act.
"A contract has to be in the title company by April the 30th to be eligible for the credit. Now, it doesn't have to close until June the 30th."
Dorrance says she and other realtors are not expecting a significant drop in sales after the credit expires because home sales will be approaching their seasonal peak.
But the late spring and summer rebound in sales may not be as strong this year, according to University of Houston professor of economics Barton Smith.
He points out that the tax credit deadline comes on the heels of the Federal Reserve's decision to quit buying mortgage-backed securities — a move that will likely result in higher mortgage rates.
"Can I sort out which factor is having the greatest impact — the elimination of the first-time home buyer's credit, or rising mortgage interest rates? I doubt that anybody's gonna be able to sort out which is the most important. But, together, they do represent a threat to the housing market in the months to come."
Overall home sales in Houston dropped by about 8% in 2009, a trend Smith says is likely to continue. However, Smith adds that home prices have remained stable, and the overall local economy is recovering faster than he, and many other economists, expected. He says that will help balance out a possible rise in mortgage rates, and the loss of the home buyer tax credit.