Many homebuilders, realtors and lenders expected to see some softening of the housing market following the expiration of the homebuyer tax credit. The homebuyer tax credit created a surge in home sales earlier this year. We asked local experts how they plan to keep the momentum going through the summer.
“The biggest push in the momentum from the tax credit was with first-time home buyers,” said Paula Monthofer, president-elect of the Northern Arizona Board of Realtors. Monthofer believes that first-time homebuyers will be key to continuing the surge. Not- ing that first-time homebuyers are younger than first-time buyers in the past, she added, “They are buying five years earlier. They don’t have bad credit; they’re not coming off short sales.”
A National Association of Realtors survey showed first-time buyers purchased 46 per- cent of homes in May. Investors accounted for 14 percent of transactions in May; the remaining sales were to repeat buyers.
“Right now, lower-end homes are moving, and that is a good indicator of things to come for the rest of the market. We have good inventory for now. Everyone wants the crystal ball to know when it is going to end. And I don’t have it,” laughed Monthofer, who is a Realty Executives of Flagstaff agent. “But the low interest rates will help keep the momentum.”
Mortgage rates are not rising as much as expected. Paul Conigliari, Flagstaff branch manager at Prime Lending said, “I closed a loan last week and they got 4.75 percent. Many people are qualifying with rates in the four percent range.
“Price values are great – you can get a lot for your money right now. Waiting for a lower price could be offset by a higher interest rate,” advised Conigliari. “If mortgage payment is a restriction, a one-percent increase in interest rate could reduce a borrower’s purchasing power by approximately 10 percent. Like with everything, there is chance you take by waiting to buy.” He suggests that homebuyers and homeowners explore their options with a mortgage professional now.
The recent National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) reported that – after two consecutive monthly gains – builder confidence in the market for newly built, single-family homes fell back to February levels, before the beginning of the homebuyer tax credit-related surge. “We expected some softening in thevmarket following the expiration of the homebuyer tax credit and this report seems to verify this assumption,” said NAHB ChiefvEconomist David Crowe. “In the coming months, an improving economy, rising employment, low mortgage rates and stabilizing home values should help the housing market move forward.”
In Sedona, where summertime temperatures typically decelerate the buying season, real estate broker Kathy Howe discussed how the tax credit worked in the Sedona market. “Although the credit meant a lot to first-time homebuyers, it didn’t affect anyone looking at [homes priced] over $700,000. Not everybody used the credit, even though they could have. The credit was not the primary reason for purchasing – it was just a bonus.
“What we’re finding here in Sedona – I just attended a meeting where four appraisers were talking about what is happening – we have not seen anything dropping off at this point. Sellers are being realistic. With the summer heat coming and the tax credit gone, they realize they have to stay in line. Yesterday, there were 29 price reductions in Sedona and the Verde Valley area. Sellers are lowering prices and that will continue to fuel more purchases,” said Howe.
“On the other side of the coin, we’re still seeing closings, sales going into escrow, and we’re still working with buyers. I try to not be too optimistic,” said Howe, who added, “As a real estate instructor – it’s not good for the agents if I am too optimistic.” Howe teaches real estate at How2Educate.
“The luxury market – million-dollar-plus – has languished, but we’re seeing some action there, too. If someone wants to use lender money, they have to go with jumbo loans [for luxury properties], and lenders don’t want to lend that much money to one person now.”
To qualify for the tax credit, homebuyers needed to have a contract signed by April 30, 2010, and then close their transaction by the June 30 deadline. At time of publication, Congress was considering extending the present homebuyer tax credit closing deadline to Sept. 30, 2010. FBN