Dean Graziosi Real Estate Blog

As soon as the Homebuyers Tax credit expired, housing prices declined in three of the four main housing sectors.  The real estate research firm of Campbell Surveys released their June report showing the following changes:

·                     Prices for move-in ready foreclosed properties fell by 8.8 percent

·                     Prices of the average short sale declined by 6.3 percent

·                     Prices for non-distressed housing fell by 4.6 percent

·                     Prices for damaged foreclosed properties increased by 5.9 percent.

“These price declines are related to the decreased homebuyer demand surrounding the end of the tax credit,” said Thomas Popik, the research director at Campbell.  “Some housing market analysts had expected demand to remain strong through the end of June, but in retrospect it’s clear that the peak of first-time homebuyer activity occurred three months earlier, in March.”

The Campbell Survey confirmed with miscellaneous reports from local real estate agents who say that today’s buyers begin negotiations by discounting $8,000.  So although prospective buyers may have missed out on the federal tax credit, they are capturing it through their lower offers.

The Campbell Survey indicates that declining housing prices are expected to decline through August.  The Campbell survey includes information obtained from 3,000 real estate agents.  Pricing analysis is based upon contracts closed through June.  However, the interviewed real estate agents indicated that contracts scheduled to close in July and August were significantly lower than those closed in June.

This is bad news for the troubled housing market but good news for serious real estate investors.  One surprising report seems to suggest that Florida real estate is making a comeback.  Prices are still depressed, but the volume of sales is on the rise. 

Analysts believe Florida is one state where investors see potential.  Supply is high and the seasonal rental demand remains high.  That formula spells profit for most investors.   

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The results of the Obama Administration’s 2009 First-Time Homebuyer’s Tax Credit helped to generate more than 1.1 million sales that closed prior to November 30^th, 2009.  In a market desperate for good news and sustainable initiatives, the National Association of Realtors, the country’s largest trade organization, lobbied hard for an extension of the bill and for expansion of the benefits.

While the government declined to pass the recommended increase in the outright tax credit to $15,000, the Obama team did expand the plan to cover existing homeowners seeking to relocate with a maximum $6,500 tax credit.  Prior to the great recession, the American homeowner typically bought and sold more than 8 residences prior to retirement.  Since the recession, existing homeowners have been sitting tight, significantly lowering the demand for existing upscale homes.  High-end prices have taken the biggest hit in terms of value and units sold.

The new initiative also increased the income eligibility for single filers and for joint filers.  The single filer can now earn as much as $125,000 while joint filers can now earn as mush as $225,000.  The value of the new purchase cannot exceed $800,000 and qualified applicants can claim up to $6,500 or 10% of the purchase price.  The tax credit for first time homebuyers remains stable at $8,000.

An existing homeowner must have occupied their home as a primary residence for the last three years.  First time homebuyers and existing home purchasers have until April 30^th, 2010 to enter into a contract for purchase and sale and must close the transactions on or before June 30^TH, 2010.

The Administration and the FHA have greatly streamlined the application and acceptance mechanics, which were once considered laborious.  As realtors and mortgage lenders became familiar with the 2009 program, it gained wide acceptance.  As such a contingency for tax credit acceptance can now be included in most real estate purchase offers.  In fact, new programs allow for the use of the credit to be applied to closing costs and help with the down payment.

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