Chicago Real Estate Lawyer - Rachell M. Horbenko

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Wednesday, April 28, 2010

Tax Credit Freak Out?

From the Chicago-Sun Times today:

As home buyers wanting to earn the federal tax credit race to sign a deal before Friday's deadline, real estate agents worry that, once the credit vanishes, so will the buyers.

"Agents are freaking out that the faucet will turn off May 1," said Ron Wexler, part-owner of Keller Williams Preferred Realty in Homewood.

The extension of last fall's $8,000 tax credit for first-time buyers -- and expansion of it to include $6,500 for repeat buyers -- was intended to lift the ailing housing market.

The market has responded. On Tuesday, the Standard & Poor's/Case-Shiller Home Price Index showed the first annual improvement in home prices nationally in more than three years.

Prices in the Chicago area fell 3 percent in February from a year earlier, but that was a major improvement from February 2009, when the annual decline was 17.6 percent.

That followed the Illinois Association of Realtors report that Chicago area home sales surged 37 percent the first three months of this year compared to a year ago.

The National Association of Realtors estimates 4.4 million home buyers will have taken advantage of the tax credits, roughly 2.9 million of those first-time home buyers and the remainder repeat buyers. Excluding investment properties or those that don't qualify for the credits, that represents about three out of every four home buyers, NAR said.

Real estate agents say they've seen a surge in home seekers trying to beat the deadline and get a sale contract signed. Kim Wasserberg is one them. She has been house shopping for more than eight months, and if she can make a deal by Friday (and close by June 30), she'll get $8,000 back on next year's taxes. But she'd buy a home regardless, she says.

"If I can get the tax credit, great," the Homewood resident said. "If not, I'll still look for a house."

That might sound encouraging, but some agents think the tax credit is pushing up sales that would have come later. The incentive forced buyers to move sooner than they had planned, which could hurt sales in the weeks to come, Wexler said.

"We're borrowing buyers from the future, and it's going to hurt us down the line."

Wexler doesn't believe the tax credit will increase the overall number of home sales ultimately. If people were not already in the market to buy a home, the incentive wasn't enough to nudge them, he said.

Baird & Warner agent Cindy Nelson Katsenes has seen a rush of potential buyers trying to get the tax credit, but she wonders what will happen afterward.

"We've never had this incentive to know what will happen when it goes away," she said.

11:34 am cdt

Friday, April 16, 2010

U.S. Housing Rises in March

According to the NY Times, builders are tentatively starting to build more homes, a modest sign that the housing market is moving toward more normal conditions.

The Census Bureau reported Friday that housing starts in March rose 1.6 percent to a seasonally adjusted annual rate of 626,000. It was the third consecutive month of increases. The rate is now 30 percent above the record low set last April.

Adding to the sense of momentum was a significant upward adjustment to the February numbers, which were originally reported as 575,000, a decline of 5.9 percent, but now revised to 616,000, an increase of 1.1 percent.

If the builders are a bit more optimistic, consumers are not.

Despite widely reported improving economic conditions, the University of Michigan’s Surveys of Consumers released Friday showed the consumer sentiment index dropping to 69.5 in April from 73.6 in March. The new level was the lowest in five months.

“While consumers think the overall economy will continue to improve, they still hold quite negative views on their own income and job prospects,” Richard Curtin, director of the surveys, said in a statement.

With the housing numbers, analysts had been expecting an annual rate of 610,000 for March. They were nonetheless unimpressed.

“The bottom line: the housing turnaround remains painfully slow,” said Jennifer H. Lee of BMO Capital Markets.

One reason for their caution: Most of the increase in March was in multi-unit construction, which tends to be volatile. Single-family homes actually fell slightly.

“Although signaling something better than the paralyzed conditions that prevailed a year and more ago, these data indicate that homebuilders are not seeing a dramatic recovery in demand,” said Joshua Shapiro of FMR Inc.

Earlier this week, the National Association of Homebuilders reported that sentiment among builders as measured by its monthly index had risen to 19 in April from 15 in March.

That increase is roughly equivalent to moods improving from miserable to merely dejected. An index level above 50, which has not been seen since the boom, indicates bullish sentiment. The record low was 8, set in January 2009.

11:11 am cdt

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