Tax Credit: Expand? Extend? Expire?

The question everyone is asking is, will the government expand, extend or simply let the $8,000 first time home buyer tax credit expire. With just over 50 days left until it is expires, the debate is on and everyone is waiting on pins and needles to hear the result.

Whichever side you take on the debate, what you can’t deny is the fact that nothing has done more in the past year to jumpstart our housing market more than the $8,000 first time home buyer credit. Will all of that come tumbling down if it isn’t extended or expanded on? It’s hard to say but I believe that if it isn’t expanded we will see a definite drop in first time home buyers in 2010 and probably a much larger emergence of investors in the entry level arena. While on the surface that may not seem troubling, it actually is. The fact is that investors purchase homes solely for net profit while first time home buyers purchase homes for lifestyle. When we have a balance between the two it keeps home prices relatively stable. If one of the two disappears, we’ll likely start to see drops in home prices which isn’t good for a market that has already taken its fair share of hits.

While Congress continues to debate the issue what we as Realtors are calling for is support of an expansion of the tax credit from first-time buyers to all homebuyers, increasing the maximum amount of the tax credit from $8,000 to $15,000, eliminating the existing income caps for eligibility purposes and extending this homebuyer tax credit for one year from the date of enactment.

We believe that stimulating demand for housing—particularly in the repeat buyer market—is the most effective way for Congress to help lead the U.S. economy into a recovery and back on the path to growth. Timing is critical and we hope that Congress will hear our voices.
While the clock ticks and we await the results of the debate on Capitol Hill, let’s take a look at this week in real estate:

· El Dorado Hills— The inventory is falling and is down close to 10% over the last few weeks. Over 1/3 of the listings are short sales and over half of those have offers and are waiting for bank approval so the true actives are very low. Closings are slower with lots of last minute loan hurdles to jump over.
· Elk Grove— How do you come up with different ways to say the same thing each week…REOs and short sales continue to dominate. We did have a “real” listing that didn’t appear to be priced overly aggressively, receive multiple offers. The only explanation is that there is little inventory and a tax credit that is expiring in November. Agents that are looking for good listing leads are finding them.
· Folsom— Good market but no easy escrows! The Folsom agents were busy with buyers this week with 75% of our total sales on the buying side and only 25% of the time representing the seller. We need more good inventory to sell just like every other office in town!
· Placerville— Inventory is the Placerville area has dropped over the past few weeks and well priced homes are receiving multiple offers. About 25% of the listings are short sales and very few REO’s. We’re seeing incredible bargains in all of El Dorado County so buyers who have been waiting for that great deal better hurry up!
· Roseville Granite Bay— Banks slow on Short Sale approvals
· Sacramento Fair Oaks-We are seeing an increase in sales and activities recently. Agents are working extremely hard on getting listings with the real sellers and the short sale Agents in the office are doing very well. Short sales are closing but taking longer than expected. We are seeing light at the end of the tunner. We just keep pushing forward. Yes, it is a great opportunity to be in real estate, especially with Coldwell Banker.
· Sacramento Metro— Market has really slowed down in our core areas of Sacramento.
Sacramento Sierra Oaks—The inventory is very low. A LOT of “frustration” from the Agents in getting appraisals and loans. The whole process is getting bogged down and taking a lot longer.
· Tahoe/Truckee— Active Inventory Summary: Active Listings: The listing inventory for the Tahoe-Truckee market went down to its lowest level since May of this year to 2,121 active listings - 1,456 residential properties and 665 lots and land listed for sale. The reduction in listings is part due to sales and in part to expired listings and homeowners taking their homes off the market for the winter. Active Listings - REOs and Short Sales: Of the active listings, there are 158 properties listed as short sales, (7.4%) and 60 properties listed as REO sales, (2.8%). While less than 10% of the active listings are short sales and REO’s, roughly 25% of the properties selling are short sales and REO’s. Sales Summary: Last Week’s Sales: For the week of September 28th to October 5th, there were 33 properties that sold which was the highest singles week for closed properties in all of 2009. Of the properties sold last week, four (4) of those sold at a price above $750,000. Coldwell Banker was involved in 11 of the 33 closed properties either on the listing or selling side of the transaction. Pending Sales: Pending sales decreased once again to 217 properties from the previous week. Market Activity Summary: Fall has definitely hit the Tahoe-Truckee area with cool weather this past week. The town was quiet and while open house activity was slow, sales for the week were at a yearly high…go figure. Buyers for competitively priced properties continue to be strong. Coldwell Banker currently has over 50 homes in escrow scheduled to close in the next 30-60 days.
· Vacaville— With rates low and affordability back we have a tremendous amount of buyers who recognize the opportunity in this market. But, we continue to have an inventory shortage, our median sold price continues to improve indicating that we are no longer in a declining market. In September we only had 1868 homes to sell compared to September of last year when we had over 4400. Our median sales price is hovering right around 200K and right now the bulk of our inventory is short sales.

Here are a few informative links regarding the $8,000 tax credit that you may find helpful:

• Update: Industry Makes Case For Home Buyer Tax-Credit Extension; Wall Street Journal
• Builders Urge Congress To Act On Home Buyer Tax Credit, Appraisal And Lending Issues; National Association of Home Builders
• Homebuyer Tax Credit Best Tool For Sustaining Housing Recovery, Says NAR; NAR
• Make The Home Buyer Tax Credit More Easily Available At Closing; RISMedia
• 1.4 Million Families Have Taken Advantage Of First-Time Home Buyer Tax Credit, More Claims Expected; RISMedia

Until next week,
Make it a great one,

Bob Bronswick
Coldwell Banker Residential Brokerage Sacramento/Tahoe