It’s On The Table!

There’s no question. The government’s first-time homebuyer tax credit has spurred a significant amount of sales this year and its positive impact on the hard-hit housing market warrants an extension. Latest estimates show that some 400,000 additional sales occurred this year due to the first time home buyer tax credit, which is about 8% of all sales this year.

The latest news in the saga, The Senate has reached a compromise on extending and expanding the $8,000 tax credit for first-time home buyers. While its passage remains uncertain, the agreement would extend the existing credit for first-time homebuyers, worth up to $8,000, while offering a new credit of up to $6,500 for some existing homeowners. The reduced credit would be available to all homeowners who have been in their current residence for a consecutive five-year period in the past eight years. Lawmakers in Washington also raised the qualifying income limits to $125,000 for single taxpayers and $250,000 for joint taxpayers, from the current $75,000 and $150,000. Under the Senate compromise, buyers must have sales agreements in hand by April 30, but they will have until June 30 to go to settlement, said the sources. The measure still faces votes in the full Senate and the House.

The U.S. Senate won’t vote until next week at the earliest. As soon as they do we intend to create a piece that will allow you to communicate the news to your clients.

Reports show that Senate action has been delayed by a Republican demand that a vote be allowed on an amendment to end the Treasury Department’s Troubled Asset Relief Program at the end of this year. But lawmakers say they want to prevent home sales from slipping as the economy struggles to recover. And as I mentioned in a previous edition of Weekly Market Watch, that is just what may happen if lawmakers choose to let the tax credit expire.

On the flip side, the Democrats, along with the Obama administration are backing it. “The success of the American economy is closely tied to the success of the housing market; by helping to stabilize the housing market, the homebuyer tax credit has helped to shore up the economy as it begins to recover,” said Baucus, a Montana Democrat. “This would enable an even greater number of potential homebuyers to take the credit.”

Thus far it seems to be doing its job. This week, Business Week reported “The broad improvement in the housing indicators in recent months leaves no doubt that the long-awaited housing recovery is finally under way.” The article went on to report: “Policy alone cannot explain the 24% gain in existing home sales since January, nor the 22% increase in new-home purchases, the 40% rise in single-family housing starts, and the recent upturn in home prices. The primary driver is historically high affordability. Fixed 30-year mortgage rates are at 5%, a multi-decade low, and prices have plunged a total of 30% since May 2006, based on the Standard & Poor's Case-Shiller Home Price Index. By that price gauge, homes are well undervalued relative to both rents and aftertax income.”

Next week I hope to report some positive news on the home buyer tax credit front. Until then, let’s take a look at this week in real estate:

• Auburn— Through October 28th there are 24 pendings and 22 closed escrows with an average price of $400,600 for the southwest area and $294,557 for homes within city limits.
• El Dorado Hills— October has been a bit busier for new sales but many of them are short sales with buyers and Agents experiencing a lot of frustration. Inventory remains low.
• Elk Grove— While short sales and REOs continue to dominate, we are seeing some signs of normalization in the market as traditional sellers are beginning to list and sell. At this point, the affect of this seems to be more psychological than anything else, but it a very positive sign. Buyers are still plentiful and inventory quite low. A comment from one of my Agents sums up the market today nicely: “Real sellers seem to be anxious to take advantage of the low inventory of "real listings". I am experiencing getting more listings that are not short sales or reo properties. I am listing properties for the flip investors. I am still getting multiple (many) offers on the bank owned properties and the poor FHA buyers are really not being able to compete, especially if they need any type of seller contribution for closing costs. There is a very fine line between ‘upping the ante’ and making appraisal.”
• Folsom— Listings are still slow but once again, if a property is priced right it will sell and quick! If the new sales this week 40% were sales of our listings by other brokers and 60% we represented the buyer on another brokers listing.
• Placerville— Sales have been brisk this month and inventory is still shrinking. A few of our buyers will be very happy to hear that the tax credit has been extended.
• Rocklin/Lincoln—Thanks to our new Move-Up Marketer program, we are seeing many good leads and agents have some wonderful stories. One agent now knows the history of a neighborhood and has made a couple of solid contacts in the area. Another came across a possible listing within the first few doors and yet another has a possible new listing and a buyer. Just as importantly, the agents are smiling and are seeing some great responses.
• Sacramento Metro—REOs seem to be picking up…just a little. Lots of short sales.
• Tahoe/Truckee— Active Inventory Summary: Active Listings: The listing inventory for the Tahoe-Truckee market went down slightly again to its lowest level since May of this year to 2,069 active listings - 1,412 residential properties and 657 lots and land listed for sale. Active Listings - REOs and Short Sales: Of the active listings, there are 169 properties listed as short sales, (8.2%) and 74 properties listed as REO sales, (3.6%). While less than 12% of the active listings are short sales and REO’s, roughly 23% of the properties selling are short sales and REOs. Sales Summary: Last Week’s Sales: For the week of October 19th to October 25th it was yet another record breaking week for the year with 37 properties that sold which was identical to last week and the largest single two weeks of the year. Of the properties sold last week, six (6) of those sold at a price above $750,000. Coldwell Banker was involved in 13 of the properties sold. Pending Sales: Pending sales decreased once again to 182 properties from the previous week. Market Activity Summary: With the two strongest sales weeks of the year back to back, it is clearly an indication of buyer’s continued interest in well priced properties and the tremendous values which exist in the market. While visitor activity has fallen off with the fall season, buyers who have been watching the market are seizing this unique time to buy Tahoe-Truckee real estate in a down market. Coldwell Banker currently has over 43 homes in escrow scheduled to close in the next 30-60 days.
• Vacaville-Fairfield— What a great time to be in real estate! Opportunity is knocking in all price ranges! With affordability at an all time high, buyers and investors are out in droves. Most of our markets are back to 2001 prices. So anyone who wanted to buy then, but missed the opportunity is realizing the dream now.
  · For our first time home buyers the city of Fairfield and Dixon are both offering First Time Home Buyer Credits in addition to the (just extended) federal $8,000 home buyer credit.
  · Because our inventory is so low, our prices are actually creeping up. This has been fantastic for our sellers
  · First time and long time investors are snatching up properties that will actually cash flow, allowing them an opportunity for wealth building.
  · Dare I say short sales are actually being negotiated by the lenders and more importantly, closing escrow!

Next week I will release the November edition of Reality Check. In it, we focus on the state of the market and include an interview with me. I think you’ll find it helpful and informative in educating your clients and prospects on the current state of the housing market.

Until then,
Make it a great week,

Bob Bronswick
Coldwell Banker Residential Brokerage Sacramento/Tahoe