by Steve Harney on May 21, 2010
The big question in real estate is what will happen now that the Homebuyers Tax Credit has expired. Did the tax credit kick-start a housing recovery? Would the momentum continue throughout the year? Any market is determined by the supply and demand for the product involved. Today we want to look at those two items as the first housing data after the tax credit is starting to emerge.
The tax credit definitely increased home sales going into April as evidenced by the increase in both pending sales (21.1%) and existing sales (16.1%) reported by the National Association of Realtors. The final numbers for April will be sensational. How will that news impact future supply?
When we talk about ‘shadow inventory’ and its affect on pricing on this blog, we are usually discussing distressed properties (REOs, short sales and delinquencies). There is also a pent-up inventory of homes where sellers are waiting to see the market improve before putting their house up for sale. As the media reports the strong increase in sales this spring, a percentage of these homes will come to market.
Zillow released their Q1 Homeowner Confidence Survey yesterday. The survey asked sellers “If you saw signs of a real estate market turnaround in the next 12 months, how likely would you be to put your home up for sale?”
Here are the results:
* 7 % of homeowners, which translates to 5.3 million homes, said they would be “very likely” to put their home on the market
* 8 % said they would be “likely” to put their home on the market
* 14 % said they would be “somewhat likely”
The report went on to say:
By comparison, 5.2 million existing homes were sold during 2009. These homeowners represent “sidelined sellers,” a component of shadow inventory that if materialized, could significantly delay timing of a market recovery.
There is not much data available on the demand side since the tax credit expired just three weeks ago. However, in an article by CNN Money, Lawrence Yun, chief economist for the National Association of Realtors, predicted:
“In the months immediately following the expiration of the tax credit, we expect measurably lower sales.”
And the most recent Mortgage Bankers Association Weekly Mortgage Applications Survey showed that demand may already be falling off:
“Purchase applications plummeted 27 percent last week and have declined almost 20 percent over the past month, despite relatively low interest rates. The data continue to suggest that the tax credit pulled sales into April at the expense of the remainder of the spring buying season. In fact, this drop occurred even as rates on 30-year fixed-rate mortgages continued to fall, and at 4.83 percent are at their lowest level since November 2009,” said Michael Fratantoni, MBA’s Vice President of Research and Economics.
What does that mean to you?
If demand is weakening and supply is increasing, prices will continue to soften. Consider this when choosing the best housing option for yourself and your family.
Print This Post
Supply and Demand Post Tax Credit