WatchFollowing a surge driven by the home buyer tax credit, pending home sales fell with the expiration of the deadline for qualified buyers to sign a purchase contract, according to the National Association of Realtors.
NAR chief economist Lawrence Yun said, “Consumers are rational and they rushed to meet the tax credit eligibility deadline in April. The sharp decline in contract signings in May is a natural result with similar low levels of sales activity anticipated in June,” he said.
Yun noted the tax credit has broadly stabilized home prices. “Without the tax credit, there will be more aggressive price negotiations between buyers and sellers. The key test on whether the housing market can stand on its own without stimulus medicine will depend critically on private sector job creation in the second half of the year.
“In most areas of the country, there will be no sharp snap back in home prices in the upcoming years, although some local markets have experienced double-digit gains this year,” Yun said. NAR forecasts the national median home price to rise only 4% cumulatively over the next two years.
Did the first time home buyer tax credit stabilize or increase home prices?
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San Bernardino, CA
It appeared to here in the Inland empire. For several months before the tax credit was supposed to end the first time and when it did end this last time April 30th, bidding wars commenced on the homes I was interested in. Most houses sold for 5-10K over what the asking price was and since the banks trickled the houses onto the market, homes were snatched up quickly. Right now, all you hear are crickets as houses once again sit waiting for new owners. The house I am in escrow on (short sale), I offered asking price with the seller paying the closing costs and my offer was accepted. There were several other bids but mine was the highest. Other houses are having to drop the asking price to get bids and even that isn't helping some.
I don't think people really understood that the $8,000 that they stood to get from the government was already factored into their purchase price. All they saw was free money and rushed to get it, no matter the cost.
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Bellingham, WA
Consumers are rational
Pull the other one, Larry.
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Oakland, CA
I dont think the surge was purely from the tax credit. There was a lot of pent up demand everybody decided at the same time that it's safe to buy.
so the bounce stronger than usual this spring.
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Yun? Why not just quote Mickey Mouse's take on the housing market? Or a log. Given Yun's track record, the log would probably be just as accurate. Maybe more so.
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Q: How do you know when Lawrence Yun is lying?
A: His lips are moving.
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“Without the tax credit, there will be more aggressive price negotiations between buyers and sellers"
Yes, Mr. Yun, and buyers wouldn't be out there paying a $40k premium just to get $8k of federal deficit cash. It's a reward to sellers and to cockroaches that carry the NAR shingle.
Someone needs to burn NAR HQ down.
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Los Angeles, CA
I find Lawrence a great source of information.
Whatever he says, I make a mental note of the opposite.
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It saved people like from buying early.
I keep making offers at exactly or less what people are asking. They keep going with the highest offer. 6months latter it still sits on the market for less than my offer 6 months ago.
They should have offered the incentive to the sellers.
Then we'd see some action.
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Lawrence Yun logic: "This is very tall; therefore it is stable."
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>>They should have offered the incentive to the sellers.
That's one heck of an idea, but it would have been better if they did that in 2005 or so.
As we all know, there is nary a politician in the land that actually wants house prices to fall any more than they already have.
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Fremont, CA
MarkinSF,
Mickey Mouse's opinion might be more legitimate,
I tend to believe Fireball's assumption that the incentive was already baked into the price. Great opinions everyone, thanks.
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San Jose, CA
Tenouncetrout says
Out of curiosity, what do you think that would have done? Flooded the market with homes and dropped prices accordingly?
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NOTHING!!
There's not damn thing Hank, Paul, George, Barack, or Lord Almighty him self could do to stop what intrinsic values of a free market, are valued at. After all the losers bung things up.
Now we've pissed BILLIONS and lot of BILLIONS too mind you of MINE and yours tax dollars to clean the books for the Dumbest Bean counters in the History of currency. Yet these houses are being hijacked and sold out the back door to Tony Sapranos crew.(It's true the FBI are busting City planners and developers bankers and investors left and right, two Broward Commissioner just got indicted this month.)
I can't think of any sanario where the all Levels of the government from Federal down to the lowly pissant City workers, intervene in any way with the value of Real Estate, where "Handcuffs" aren't involved.
And the Beauty of it, is in 2012 after the Tea party abolishes the Health Con act of 2010, they will retroactively go after all of these people. There's a shit load of money and feathers to be made in prosecuting them. Unless they decide to grill bigger fish like Hillary Clinton for treason against the state of Arizona and security of the United States.
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Fremont, CA
It is rather amazing that there has been all that crime, bogus bank bonuses, taxpayer ripoffs, federal reserve lying under oath in congress, etc, etc etc and there still are no real convictions.
Its pretty amazing anyone follows the rules given those examples.
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Concord, NH
The tax credit did stabilize and artificially support house prices... which now must fall more quickly to make up for lost time.
In many cases the $8,000 (for 1st timers) made it so they have no skin in the game.. in any market where starter homes can be had for $150-175K (not CA for the most part).. assuming 2% in closing costs and a 3 1/2% FHA down, there is almost no money from the buyer... so this means a drop in price of 3 1/2% and they are well underwater if they want to sell facing 8% in transaction costs... so Big O has helped us to have a new batch of buy and walk aways.
He does not get it... or, worse, maybe he does and this is his plan... do away with contract law... and that's what dictators do... rule by decree
point is.. it was a bad idea and us taxpayers will get spanked once again.
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“Did the tax credit stabilize home prices?”
Maybe in some other states, as other non- CA metros have had their correction. CA still has lots of correction to go through.
The NAR certainly needs to be investigated and put under fire for the crap they were and still inflicting on the public. The govt is over focused on persuing Wall Street/Banks and not going after the NAR. Given NAR influence over the govt, its pure corruption, and it needs to be stopped.
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toothfairy says
If anything, it pulled demand forward leaving fewer buyers in the future, which will push prices lower.
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Concord, NH
thomas.wong1986 says
TW is correct... this will accelerate price declines... and a federal study showed that just one in 8 purchases were dependent on the tax credit... so, in effect, each creadit was $64,000 in value paid by the taxpayers.
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47 male
Lafayette, CA
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cevansnh says
How can the tax credit be nearly worthless in motivating new buyers (1 in 8) AND an effective tool to pull demand forward leaving fewer buyers in the future? Seems to me you don't get it both ways.
Assuming the tax credit motivated 12.5% of buyers, a certain number of those buyers would have bought anyway 1 month, 2 months, 3 months, 6 months, etc. out into the future.
Therefore if you want to determine the number of future sales affected by the $8000 credit, the 12.5% should be amortized on a declining scale over perhaps 2 years. So you'll get 1% fewer buyers in June, .9% fewer buyers in July, .8% fewer buyers in August, etc.
I don't think a 1% drag on the market is going to make a damn bit of difference.
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Tenouncetrout says
You crack me up. You always start out saying something that totally makes sense, then devolve into a nonsensical right-wing rant.
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gameisrigged
Don't forget there's only Two parties in this Country and the last two elections I was told that if I didn't chose sides then my Vote either didn't count, or was robbing Senator Kerry of his chance to suck worse than Obama.
My rant is how I see it and what I would like to happen, the closing statement, is a more likely scenario of what we'll get at best. More political two party glad handing and political Gladiator fodder.
I doubt the Democrats or the Republicans are going to do Diddly squat about the theft that has taken place over the last Decade. We pinned the tail on Bernie Madoff, and he will be double ought's Villain after all of this.
Hank Paulson and Ben Bernake could write a tell all book in five years from now, stating an elaborate scheme where they begged for Tax bailouts, and the beneficiaries would cut them a check the next morning. It would make the Opera Book club, more than it would create a rabble.
And Frank Dodd could go on to take Carl Molden's place as the American Express spokes person.
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47 male
Lafayette, CA
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You know, it is possible that both sides are right on the bailouts. That the world economy would have collapsed had AIG, Freddie and Fannie, and the banks not been saved. That it was also an outright theft of hundreds of billions.
Who wiped out all the interstate banking rules that prevented banks from becoming too big to fail? I'll give you a hint.....the letters of his name = 666
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Oakland, CA
thomas.wong1986 says
it pulled demand forward but also cleared out supply so it's mostly a wash.