I wrote a few blog posts about the housing market at the beginning of the year, and with the First Time Home Buyers tax credit about to expire, I thought I would touch on it once more. The housing market as a whole has quite an effect on those of us involved with old houses. It affects old house enthusiasts who have restored a house and hope to sell it, and it can also help or hinder a family hoping to purchase their first old house. However, the housing market touches other areas as well, such as the prices of building materials, and the availability of certain construction-related items. The health of the housing market can even affect the costs of restorations and repairs done by contractors on old houses.
The Tax Credit Appears to Have Been Beneficial
The First Time Home Buyers tax credit extension appears to have helped the housing market. Purchase agreements signed in February caused an 8.2 percent increase from January, the second largest increase on record. A Kansas article reports that through mid-February, 1.8 million people have taken advantage of the tax credit in 2008 and 2009, and their tax credits total 12.6 billion. That’s a pretty sizable amount of credits buyers are receiving. Prospective buyers know they don’t have much longer; the credit runs out April 30. Anyone wanting to take advantage of the credit must have a signed sales agreement by April 30, and close on the home by June 30. A Buffalo, New York, article reports that realtors are working twelve-hour days trying to find houses for anxious buyers, and buyers for available properties.
What’s Next for the Housing Market?
The big question is what happens after April 30? The spring buying season is traditionally good for selling new and existing homes, and then it drops off slightly as families go on vacation and are busy with summertime activities. The tax credit will have expired, and the federal programs holding down interest rates are also running out. Mortgage rates are headed upward: USA Today reports that home buyers are rushing to purchase before rates rise too much, and they can no longer afford to buy. I don’t know how much of that is true–it seems to me that tighter credit standards and required down payments are keeping more people out of the market than the slight rise in interest rates.
Of more concern is the next wave of foreclosures the Washington Post is reporting. There could be as much as a three-year supply of foreclosed houses coming back on the market, and if that happens it could be very bad news for housing. These are not sub-prime loans defaulting–supposedly most of these foreclosures are families who have had financial difficulties or job loss due to the economy–which goes back to what I have thought for the last year. The housing market will not show any sustained strength until unemployment gets under control.