With all the focus on the Home Buyer Tax Credit and the recent extension of the closing deadline, we may have forgotten about the need to strengthen the actual housing market. The tax credit was nice for those who happened to be buying during the qualifying period. The tax credit may have been enough incentive to encourage some who might have planned home purchases next year to buy this year instead.
The first look at the post tax credit home purchases though gives a hint that the tax credit may not have done much to bring health to the overall housing market.
Today pending home sales for May were reported to have dropped significantly, lower by 30% from April 2010 with the tax credit and by almost 16% from May 2009. A drop had been expected, but this was a much larger drop that I had seen predicted anywhere.
The pending home sales number combines with higher new unemployment claims and a recent report indicating that a high percentage of home sales were foreclosured properties (with even more foreclosured homes not yet on the market but coming) to suggest that the housing market is weaker that economists at least were stating publicly.
When the expansion of home buyer tax credits was originally being discussed, I wrote a post expressing concerns that the money used towards the tax credits might be spent in better ways to strengthen the housing industry.
We have reduced the number of qualified buyers with regulatory and underwriting changes.
We have a large and growing(?) unemployed and underemployed population.
We have an increasing foreclosure inventory.
The tax credit may not prove to have been the correct answer. I had hoped that the tax credits themselves might spur sufficient purchasing to have an impact on the economy. I hope now that the coming months will show stronger home sales data, but the focus of government and industry professionals must be directed towards the improving the foundational health of housing.
We need to increase the number of qualified buyers and to develop programs that meet their purchasing needs. I am not sure that our current Congress and regulatory agencies are up to the problem. I have read some analyses that question whether home ownership is to be preferred. More on that question in a later post.
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Richard Smith |
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Richard Smith Conventional, FHA, FHA 203k, HUD $100 down purchases, VA, Jumbo VA, Rural Development, Jumbo, FannieMae Homepath, Home Equity Line of Credit (HELOC). |
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Richard, thanks for the post. Saw this re-blogged before I saw the original. The Tax Credit program gave us a boost in sales. We need a long term stimulus that will provide for sustainable growth in home ownership. I think most will agree that the creation of jobs and a more stable economy would give us the platform we need to generate more real estate sales.
William, good to see you again. Thanks for commenting.
Thanks for the information Richard. For a while I have suspected the tax credit was a band aid to the housing recovery, obviously not a permanent solution. The real solution is job creation which is the underlying factor of the economy as a whole.
Mike,
Thanks for commenting. Employment is a key. And everything points to a long time for any significant change there.