Washington, October 23, 2009
Rightardia comment: The good news: Much of this growth was fueled by first time home buyers who used the Federal government's $8,000 tax credit. The bad news: One third of the taxpayers filed for the tax credit fraudulently according to IRS. Congress may not renew the credit because of this fraud. The program expires on Dec. 31.
Many of the home buyers are investors called flippers who pay cash for homes that need renovation. After one to three months of renovating the distressed property, they sell them at a handsome profit. It is likely that some of the flippers tried to benefit from the tax break. The credit was designed for first time home buyers who must live in the house they purchased for at least three years.
Existing-home sales – including single-family, townhomes, condominiums and co-ops – jumped 9.4 percent to a seasonally adjusted annual rate1 of 5.57 million units in September from a level of 5.09 million in August, and are 9.2 percent higher than the 5.10 million-unit pace in September 2008. Sales activity is at the highest level in over two years, since it hit 5.73 million in July 2007.
Lawrence Yun, NAR chief economist, said favorable conditions matched with a tax credit are boosting home sales.
“Much of the momentum is from people responding to the first-time buyer tax credit, which is freeing many sellers to make a trade and buy another home,” he said. “We are hopeful the tax credit will be extended and possibly expanded to more buyers, at least through the middle of next year, because the rising sales momentum needs to continue for a few additional quarters until we reach a point of a self-sustaining recovery.”
Even with the improvement, Yun said the market is underperforming. “Despite spectacular gains in the stock market, principally from the financial sector recovery, most of the 75 million home owning families have more wealth tied to their homes.
Home values could soon turn consistently positive and help the broad base of middle-class families, but we are not there yet,” he said. “We’re getting early indications of price stabilization, but we need a steady supply of qualified buyers to meaningfully bring inventories down and return us to a period of normal, steady price growth and to fully remove consumer fears, which would then revive the broader economy.
Without a firm foundation for middle-class wealth recovery, the post-recession economic growth likely will be one of the weakest in U.S. history.”
Early information from a large annual consumer study to be released November 13, the 2009 National Association of Realtors® Profile of Home Buyers and Sellers, shows that first-time home buyers accounted for more than 45 percent of home sales during the past year.
A separate practitioner survey shows that distressed homes accounted for 29 percent of transactions in September.
See the complete article at http://www.realtor.org/press_room/news_releases/2009/10/rebound_shows?lid=ronav0021
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