A spike in spring home sales given a bump by a federal tax credit is failing to translate into a strong summer sales season.
Most local realtors agree the Worker, Homeownership and Business Assistance Act of 2009, which offered first-time homebuyers a tax credit of up to $8,000 and move-up homebuyers a credit of up to $6,500, helped make for a successful spring market. Now that the tax credit is off the table, though, it looks like a sluggish summer is ahead for home buying.
“It has come to a screeching halt,” said Re/MAX Metropolitan Realty agent Mike Aubrey. “During the spring tax credit we sold everything we could put a sign in front of.”
The tax credit was an effort to boost the real estate market nationwide out of its slump. The tax credit was used to bring new families into the housing market, reduce the inventory of unsold homes and increase home prices nationwide. Homes up to $800,000 qualified, and buyers had to meet maximum income requirement of $125,000 for single taxpayers and $225,000 for married couples filing joint returns.
Since January 1, 2010, there have been 34 homes in Lakelands sold and another 110 still under contract and eligible for the tax credit. In Kentlands, 37 homes were sold and another 16 are under contract. In Quince Orchard Park 14 homes sold since the tax credit was enacted and another four are under contract. Homes that are under contract have until June 30 to settle and still be eligible for the tax credit.
“It has been a great spring because of the tax credit,” said Long and Foster Realtor Elaine Koch. “Without the credit it would not have been so pretty.”
Spring sales saw multiple offers on homes.
“We found our first-time homebuyers were racing to the finish line to purchase before the credit expired,” said Amy DePreta with Re/Max Metropolitan Realty. “To have 10 new buyers and six sellers come out of the woodwork is definitely a change from spring last year.”
Larry Prigal with Re/Max Realty said the tax credit didn’t make much of a difference in his sales in Kentlands and Lakelands because the credit was not enough money to influence his buyers.
“When you are in that higher price range it isn’t a significant percentage of the transaction,” he said. “I don’t think the $6,500 tax credit did as much to impact the move-up buyers as I had hoped it would do.”
Summer is normally a slow time for the market as families focus on vacations and summer activities, according to Koch. She said sellers will need to focus on pricing their house right and presentation to make a sale this summer.
“What will happen is that the days on the market will increase, and it will be more important than ever that the price is right and the house looks like it should,” Koch said.
Lakelands homes this spring spent an average of only nine days on the market, according to Aubrey.
“We are going back to a more normal pace. There isn’t that sense of urgency,” Aubrey said.
While showings of homes have dropped, those looking are in the market to buy.
At press time there were 20 homes in Lakelands on the market; 17 in Kentlands; and 10 in Quince Orchard Park. Low mortgage rates should help some buyers with their decision.
Koch said real estate is still clawing its way back to a normal market.
“We are really coming out of the worst housing market ever. We are recovering. I think we have seen the lowest we are going to see. I hope,” she said.
Townhomes and single-family homes in the $500,000 range are still selling, according to Prigal, who said Kentlands and Lakelands is an area where “people want to be.”
“In other areas that $8,000 break did a tremendous job. Here I didn’t see a significant change. I had buyers and sellers when they had the tax credit, and I have them now,” Prigal said.
Aubrey described the market’s battle back from its tumble as having peaks and valleys.
“I predict this is a double dip recovery. This spring was the apex of the midpoint of that ‘W’ recovery. I think we will see things go down again nationally now that synthetic factors like the tax credit is going away. I think rates will go up over the next 12 to 18 months,” Aubrey said. “We have been riding a roller coaster.”