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House hunters out in force

Home sales surge before tax-credit deadline

Created date

February 28th, 2010

For the first time in a long time, home sales are up and house hunters are out in force. Experts say the trend is due largely to the substantial tax credit for homebuyers. First-time buyers are eligible for up to $8,000 in tax credits and repeat buyers can earn $6,500. Buyers must have a contract in place by April 30 and settle by June 30, 2010, to qualify for the credit.

Second chance

The tax credit was set to expire this past November but was extended to the new April 30 deadline. According to a report by The New York Times, the number of existing homes that changed hands in 2009 4.6 million was up 5% from the previous year. It was the first annual increase since 2005. The National Association of Realtor s chief economist, Lawrence Yun, says the credit spurred a flurry of activity in 2009. This clearly was a rush of first-time buyers not wanting to miss out on the tax credit, but there are many more potential buyers who can enter the market in the months ahead, Yun says. We expect a temporary sales drop while buying activity ramps up for another surge in the spring when buyers take advantage of the expanded tax credit. It s significant that home sales remain above year-ago levels, he adds.

Vintage value

Yun projects 2.4 million households to take advantage of the credit in 2010. He says buyers will be looking for older homes, not new ones. New-home sales will remain low due to a lack of construction; existing-home sales are projected to rise to around 5.6 million in 2010, he explains. Last year there were 5.1 million existing-home sales. He adds that one of the greatest benefits of rising sales will be firming home prices. For several months now we ve been seeing stabilization in all of the home price measures as inventory is pulled down, Yun explains. As a result, the housing wealth for many middle class families has begun to stabilize.

Boon for sellers too

Jim Kelly, senior vice president of sales for Erickson Retirement Communities, says he s witnessed the positive trend. People are selling their homes. A lot of people who are moving into our communities are experiencing a quick sale and are getting their asking price, and occasionally even a little more. There seem to be a lot of buyers out there. Kelly believes it s a result of the tax credit. First-time homeowners are often the ones looking to buy older homes, he says. Those first-time buyers want to get out of rental apartments, start families, and are willing to purchase a well-maintained home that may need just a little updating. NAR President Vicki Cox Golder says market conditions are competitive. There s a shortage of lower-priced homes for sale in much of the country, resulting in multiple bids in some areas, she says. Those older homes are a great value for first-time buyers, especially if they have their own yard or are located in a good school district, Kelly adds.