Tax credit for first-time homebuyers stimulating real estate market
Jason Bain, his wife Jessica and their 6-month-old son Marshall are kicking off their summer with move into their very first house.
"It's actually a very large house, 2,700 square feet, and its got a half-acre lot so we're pretty happy with that," Bain said a couple of days before the move as he scrolled through pictures of the Burnsville house that is now his family's home.
The Bains started house shopping before the $8,000 first-time home buyer was passed in the economic stimulus bill. Jason Bain called the tax credit a "huge bonus" that's making the transition from renting to owning easier.
"It's a great incentive," Bain said. "Our down payment is $8,665, so essentially that's our down payment right there that we'll eventually get back."
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Bain said he and his wife looked at as many as 50 properties before settling on the Burnsville house. He said almost from the moment the tax credit was passed, they saw big changes in the market. Open houses were busier and houses seemed to start selling more quickly.
Statistics compiled by the St. Paul Area Association of Realtors show pending home sales -- those are signed contracts -- jumped nearly 24 percent in the 13-county metro area from April of 2008 to April of 2009.
The median [home] price over the last four months has been relatively stable.
Year-to-date those sales are up nearly 17 percent. Patrick Ruble tracks the statistics for the association.
"I'd say the story the numbers tell is that pending sales are increasing over time, inventory is decreasing and the median price over the last four months has been relatively stable," he said.
Ruble said the decreased inventory number is significant. Last month there was enough inventory that it would take five-and-a-half months to sell it all off. That's the lowest rate in more than two years.
Many of the home sales that have brought that number down have been bank-to-buyer transactions, rather than traditional home owner sales.
"I refer to them as dead-end sales," said RE/MAX Results agent Jerry Moscowitz, who helped the Bains find their home. That deal was not a lender-mediated sale, but Moscowitz said he's seeing plenty of them.
Real estate agents long for the return of a market where each sale triggers another, but Moscowitz said the glut of bank-owned property must first be sold.
"I think it's necessary because these foreclosures and short sales, those are homes that have to be sold," Moscowitz said. "They have to be moved to be able to get to a more traditional market right now. As long as you have a lot of those homes on the market, it's going to be tough for the real estate market to get back to the way that it was."
Right now, lender-mediated deals account for more than half of all sales, and that's up considerably from a year ago. But that ratio underscores the market is far from healthy because so many sales are troubled properties.
But University of St. Thomas real estate expert Tom Hamilton said the numbers justify a sense of optimism. Hamilton said stability appears to be slowly returning to the Twin Cities housing market. He said it is impossible to determine just how big of a role the tax credit is playing.
"The fact that we're having an increase in sales, a decrease in the supply and if prices start to stabilize, possibly even start to tick up, we could say part of that was attributable [to the tax credit], but how much we just don't know," Hamilton said.
The $8,000 first-time home buyer tax credit expires in December. Real estate agents are already pushing to have it extended and possibly even offered to all home buyers.