People attempting to beat the first-time home buyer tax credit deadline of April 30 helped push existing-home sales up 7.6 percent last month to a seasonally-adjusted annual rate of 5.77 million units. That was an increase from the rate of 5.36 million units for March, according to the National Associate of Realtors.
The first-time home buyer tax credit offered home buyers an $8,000 incentive if they had a deal signed prior to the end of last month.`
Lawrence Yun, the chief economist for NAR, said the gain was widely anticipated. “The upswing in April existing-home sales was expected because of the tax credit inducement, and no doubt there will be some temporary fallback in the months immediately after it expires, but other factors are also supporting the market,” he said. “For people who were on the sidelines, there’s been a return of buyer confidence with stabilizing home prices, and improving economy and mortgage interest rates that remain historically low.”
It’s also worth mentioning that the median existing-home price for all housing types was $173,100 in April – up 4 percent from the same time year ago, and that distressed home accounted for one-third of all the sales.
Total Mortgage president John Walsh believes the tax credits had a positive impact on the U.S. housing market.
“On the whole, the tax credit had a very positive effect on the housing market. It was a key factor, along with both mortgage rates and housing affordability being near record lows, that helped stabilize the housing market at a time when support was needed,” said Walsh. “Over the last few months, our company experienced a sharp increase in purchase loans that we attribute primarily to the tax credits.”
Walsh has also surmised that it is now a good time for the housing market to function without any tax-credit support.
“The credits had already been offered twice, and any time the government subsidizes a program for too long, there is a possibility to create market inefficiencies,” says Walsh. At some point, the housing market needs to stand on its own, and artificially supporting the market for too long may simply prolong the recovery process.”
Home sale numbers will likely be robust through May and June as well, as people who had deals in place prior to the April 30 deadline have until June 30 to close on them.
Home buying activity could slow down later in the summer, particularly if a tax credit isn’t reintroduced.
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first time buyer mortgage
May 26, 2010 @ 2:06 am
Mortgage rates are historically low while inventory selection remains plentiful.
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