The end is near – or is it?
I thought about quoting the Doors song, “The End” as my intro for this column, since I think many industry observers and participants may have concerns about what will happen to the real estate market now that the April 30 qualifying deadline for the Home Buyer Tax Credit has ended.
But I think that is sort of a depressing song that sets the
wrong tone for what I have to say – because I am not necessarily sorry to see it go.
What’s that? A real estate agent who is ready to say goodbye
to the biggest buyer incentive program in our lifetime? Yes, because while I believe the
program did an OK job of supporting the real estate market through the biggest
crash in two generations, the only stable market is one that can sustain
itself. Pricing and volume are
important factors but it’s volatility that creates problems for buyers and
The overall goal is to return stability. The tax credit did a good job during dark economic times. But now it’s time to allow the market to find price levels that will sustain stability without artificial incentives and without borrowing from future sales.
The good news is that I think we are mostly there already. The next couple of months could see fewer offers written than in the early spring.
However there is still quite a bit of buyer activity going on in Mukilteo, even without the credit. As of May 10, five properties reached agreement with offers that do not seem to qualify for the tax credit. If this activity continues through May, we could see numbers that are not much different.
In addition, Mukilteo is and has always been a seasonal market. Late spring/early summer is when our area is at the peak of its natural beauty, and when relocating families enroll their children in school. These factors don’t change much year to year, no matter what the market as a whole is doing.
Another important factor is distressed listing inventory. Programs now exist to incentivize lenders to cooperate with homeowners whose loan amounts are in excess of their home’s current value, for a positive effect on closed sales numbers.
In fact, 32 percent of April’s closed sales in Mukilteo were either short sales or bank-owned properties. With a quarter of available listing inventory bank owned, lender cooperation could play a bigger role than the tax credit in helping increase closed sales volume..
All in all, it’s still a great market for buyers able to take advantage, even without the tax credit. My contention is that today’s buyers are savvy, and are driven more by whether they can find the right home, at a price they feel is a good value and at an affordable rate than by whether they get a few thousand dollars back on their taxes.
Pricing does seem at a level that can sustain their interest. Rates are still near historic lows, although they’ve bumped up a bit. Recessionary fears are finally easing, even if unemployment is still higher than we’d like. And distress sales are receiving the support they need to allow excess inventories to begin clearing.
These are important factors in returning to a more stable market, and the trends seem positive.
So, goodbye, buyer tax credit. Here’s to a smooth closing for all those buyers who are under contract to close by June 30, and here’s to the new normal.
The market may not have recovered to what it once was, but that’s probably not a bad thing. Let’s hope the new normal is more stable and sustainable than the old normal.