Sacramento Real Estate Views

Your Questions Answered!

“Has the market cooled at all with the Nov. first time home buyer money coming to an end?  Is it a waste of time to offer less?”

I got these questions today and I thought they were great ones to address because in 45 days or so the first time home buyer tax credit may come to an end.

No, the market hasn’t cooled because the number of homes for sale has decreased dramatically.  There are multiple offers everywhere, prices have increased a bit due to the competition for homes and the title companies are seeing short sales closing a little faster as well as an increase in regular real estate transactions. (between willing buyer and seller, like it used to be!)

Should you offer less?

Only on properties that have been on the market for extended periods of time. This applies to homes in higher price ranges that are taking longer to sell.  Everything below $300K or so is flying off the shelf, so to speak.

First Time Home Buyer Tax Credit Extension

Based on my research, I have a feeling the tax credit will be extended. There is so much support for the first time home buyer tax credit as it has added 400,000 additional sales this year and could add up to another 1.86 million sales* in 2010 if it was extended for one more year.

All Buyers or Just First Time Home Buyers?

I don’t think, based on what I’m reading, that the question is whether or not to extend the tax credit but whether to open it up to all home buyers or keep it strictly in the first time home buyer side of the market.

70% of first time home buyers surveyed said that an extension of the tax credit would have either “some influence”, “significant influence” or would be the “primary influence” in a purchasing decision in 2010.*

That could equate to up to 1.86 million additional sales in 2010.

While I consider that to be a pie in the sky number, even if the 18% who said it would be of “primary influence” purchased, that would end up being an increase of 334,000 sales in 2010.

That’s good too!

If The Tax Credit Isn’t Extended

If the tax credit expires without extension, I believe sales will slow somewhat but I don’t think first time home buyers will just dry up and blow away.

I’ve been seeing more activity from my investor clients ramping up for the “investor buying season” when sales typically slow down and prices of homes level out for the year.

If interest rates go up, this commonly happens when the economy improves as it appears to be, we could see a more pronounced slowing in sales to some first time home buyers and that could affect values negatively.

The unknown in all of this pure speculation is the number of homes available for sale. Right now there just aren’t that many homes for sale.  Inventory levels are very low and although there are multiple offers on just about every listing, the inventory being low is having an affect on the number of sales.  You can’t have sales if there aren’t any homes to sell.

We’re seeing more and more “off market” sales. Homes that just mystically sell over night without ever having been listed on the open market.

The Unknowns

Will inventory levels go up?

Will the banks begin releasing all or part of the 7 million foreclosures accumulating to the open market?

Will the home buyers tax credit be for everyone or will it just be for first time home buyers?

If the banks start releasing their assets to the open market, how many will come at once and how will values be affected?

For investors in the Sacramento real estate market, these questions are pretty important to buying decisions over the next 6 months.

In the next 45 days, we’ll know about the tax credit.  As for whether or not there will be more homes coming on the market for sale, we’ve been waiting for the answer to that question for a year.

Stay Tuned!

Thanks for visiting!

*Numbers based on a Zillow survey, click here for more info.

No related posts.

Tags: homes for sale sacramento

This entry was posted on Wednesday, October 14th, 2009 at 9:04 pm and is filed under Your Questions Answered!. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

1. Brandon Nelson said at October 15th, 2009 at 6:32 am

   Robert,
   Great post! I’m doing my best up here in Bellingham to predict the Tax Credit extension, too, and the indicators are changing constantly. Seems like the trend in thinking points toward an extension, and after seeing the drop-off follow the end of the Cash for Clunkers program, I hope that set enough of a precedent to avoid doing the same thing with housing.

Leave a Reply

Name (required)

Email (will not be published) (required)

Website

Receive an email if someone else comments on this post?

Spam protection by WP Captcha-Free