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Bye, Bye Credit

man, net

 

With a little over a week left for Ann Arbor buyers to qualify for the Home Buyer Tax Credit, some may think “What’s the rush?  It will probably be extended!”   Consumers might like that, but by all indications, the credit will not be renewed.  This time around, two of the biggest forces in pushing for the original extension, the National Association of Realtors (NAR) and the National Association of Home Builders(NAHB) are not pushing for it, as they feel market forces are talking over. 

 

The federal tax credit was never meant to last forever, but the timing the end of this seems a little odd.  Spring and Summer are the traditionally the biggest home selling seasons.  Ending the credit when the spring season is just reviving up is akin to taking the training wheels off your kid’s bike in heavy traffic.  He may be able to keep up, or he may fall down; would you want to take the chance? 

Having the credit valid through Summer, 2010 would have been better, but many analysts feel that those who were most motivated by the credit bought last year.  In addition, as each new home sale costs the government $43,000 in lost taxes, in an era when the deficit is rising, the credits have not been offset by other cost cutting initiatives.

 

More importantly, some argue that the credit has done its job.  Many buyers who were skittish because of the economy made the leap to ownership, while generally consumers have regained confidence in home buying.  A recent Gallup poll noted that 72% of those interviewed believed that 2010 was a good time to buy vs. 53% in 2008.  About 77% expected housing prices to remain the same or rise, with 34% of those expecting price increase – up 12% over last year.  This figure was only 24% in the midwest, compared to 39% on the east and west coast.

 

With the stimulus ending, three big questions loom.

 

  • With impact will continued foreclosures and a further release of bank-owned homes into the market have on inventory?  Can home buyers absorb them?  Some states like California, always near the top in foreclosures, offers it own credit.

 

  • Especially in Michigan where unemployment was the highest in the nation (14.1% in March, 2010), will unemployment derail housing recovery?   The out of work are out of the game as homeowners but the numbers may derail confidence. 

 

 

  • What will happen up with higher priced homes?  Due to both income limits and property price limits, the upscale housing market was not directly helped by the credit.  Repeat buyers who might look at one of these homes could benefit form move-up buyers who could claim the credit.

 

As there is no assurance that a longer credit would fix any of these problems, the credit will probably end on schedule.  This leaves prospective buyers with two pieces of advice:

 

  • If you aren’t ready to buy, there will be homes when you are.  A few thousand dollars is not enough to push you into home prematurely ownership.

 

  • If you are ready to buy a house, act now.  You can still sign a contract by April 30.

 

Need a Realtor who’s ready when you are?  Whether you are buying or selling your home the Bouma Group can help you with your real estate needs in Ann Arbor, as well as keep you up to date about Washtenaw County and Ann Arbor neighborhoods.  Check out our Condo Hotline to get a handle on the Ann Arbor condo market.

 



Posted Tuesday, April 20, 2010 by Martin Bouma
Tags: ann arbor real estate, ann arbor condo , home buyer's home credit