A last minute rush of home purchases by first time home buyers wanting to take advantage of the expiring federal housing tax credit was the cause of home sales far exceeded expectations last month, surging to the highest level in 2 1/2 years.
The National Association of Realtors said Monday that
home resales rose 10.1 percent to a seasonally adjusted annual rate of 6.1 million in October, from a downwardly revised pace of 5.54 million in September.
The tax credit of up to $8,000 for first-time owners was originally set to run out on Nov. 30, but Congress renewed it earlier this month and broadened its reach. Now even existing home owners who have owned their current homes for at least five years can now claim a tax credit of up to $6,500 for a home purchase. To qualify, buyers must sign a purchase agreement by April 30.
The Realtors report on October home sales reflect offers made before buyers knew the tax credit would be extended. "There was a lot of rush and hurry to complete sales" before the deadline.
Home sales are likely to drop over the winter as buyers hibernate for a few months without the looming tax credit deadline making this winter possibly the best time to begin shopping for a home.
With a large inventory of homes for sale and limited time for sellers to sell with the threat of foreclosure hanging over their heads, there just may be some spectacular deals to be had and many options to choose from with little competition from other buyers.
The new deadline means that we're going to see some good activity coming out of the spring.
Sales, which were nearly 24 percent above last year's level, had been expected to rise to an annual pace of 5.65 million, according to economists surveyed by Thomson Reuters.
The median sales price was $173,100, down 7.1 percent from a year earlier and off 1.6 percent from September.
In addition to lower prices, mortgage rates have been hovering around 5 percent since the spring, largely because of government intervention. That has helped restore housing affordability in large swaths of the country.
The inventory of unsold homes on the market fell about 4 percent to 3.6 million. That's a 7 month supply at the current sales pace, and close to a healthy stock of about six months.
Over the summer, the housing market started to rebound from the worst downturn in decades, aided by aggressive federal intervention to lower mortgage rates and bring more buyers into the market.
But experts forecast that prices will fall again. Most say they will hit a new low next spring, perhaps falling another 5 to 10 percent, as more foreclosures get pushed onto the market.
But the government support can't last forever. For example, the Federal Reserve is likely to curtail its effort to push down mortgage rates next year. If rates then rise too high, it would make home purchases less affordable and dampen housing demand.
"When we do kick those crutches out from under the housing market, will it be able to stand on its own?" said Mark Fleming, chief economist with real estate information company First American CoreLogic. "It's really hard to tell."
A record-high 14 percent of homeowners with a mortgage were either behind on payments or in foreclosure at the end of September, the Mortgage Bankers Association said last week. The worst damage is still concentrated in the states hardest hit from the start: Florida, Nevada, California and Arizona. Together, they accounted for 43 percent of new foreclosures.
So what does this mean for New Jersey home buyers? It’s hard to say but not being at the top of the foreclosure list of states could possibly mean we’ve hit bottom or already very close, couple that with very low mortgage rates and buyers will need to decide if now just may be the optimal time to make a purchase or wait to see if prices drop a little more and risk higher interest rates in the spring.
The great news is New Jersey has several local state, county and federal finance assistance programs available that could add up to $20,000 in home purchase discounts in the form of government grants. (depending on your location, price, income etc. and of course the knowledge of these programs available by your realtor and mortgage representative.)
Whenever your ready, Marivic GMAC Real Estate will be here to keep you informed and let you decide, remember we’re here to help.
www.MarivicRealty.com
Local: 732-650-9911
Toll Free: 1-866-745-GMAC(4622)
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This article is based on excerpts of a 11/23/09 story by ALAN ZIBEL
AP Real Estate Writer. Additional story contributions from Victor Kaminski Broker of Record of Marivic GMAC Real Estate.
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