Hello and welcome to this week’s edition of Moorings. We are coming down to the wire with the $8,000 first time home buyer tax credit as it expires on the last day of this month. Just a quick recap, you need to have closed on your home by the 30th of this month to take advantage of the tax credit or else you will be too late. Something to consider if you are in fact still looking, make sure you are working with a mortgage banker who can actually close your loan in time. Many brokers are now quoting 30-45+ days to close a loan which would put you outside of the time limits.
On another note, I thought it would be a good idea to take a look at how the this tax credit has affected our industry. As of September 2009, existing-home sales were up nationally by 9.4% from the previous month and up 9.2% from the previous year. The total housing inventory (listed homes) fell by 7.5% to 3.63 million homes. A total of 5.57 million homes having been sold with five gains in the past six months. As everyone knows, home values have declined over the past few years and which has also helped fuel new purchases, but declining home values also serves to negatively affect the economy. At some point these values will begin to go on the rise again and with most of the 75 million homeowners in the country having a majority of their wealth tied in their home, this is largely a positive thing with regards to the economies overall performance.
While the tax credit has indeed positively affected the housing industry as well as the overall U.S. economy, it will also have an effect if the government allows it to end while we are still in the midst of a recovery AND during a time of year that is historically the worst for housing (the months leading up to Christmas). Obviously most everyone in the real estate and mortgage industries want the federal government to extend the credit until our sector is well on its way to being in the black again but also this is simply a bad time of year to let it end. Historically people don’t buy homes at the same time they are saving up for the holidays for gifts, vacations and time off. Currently this isn’t the case since they are being offered an incentive, but take that away and we run the risk of plunging from a period of high-sales into one of extreme low’s. While I completely understand that the cost of this program is massive (around one billion dollars per month) I also realize that housing is one of the biggest industries in the country and quite simply we must do whatever is necessary to assure it’s jumpstart is continued until all is well. Continuing the tax credit is a great second-step to this end. Until next week, Numbers 6:24-26 be on you.