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Tick Tock: Tax Credit Deadline Looms, Agents Quake

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April 30 or Bust

The real estate world is all abuzz with the latest deadline about to be thrust upon us: April 30 is the looming deadline for home buyers to be under agreement if they intend to take advantage of the tax credit (up to $8000 for first time homebuyers and $6500 for everyone else). They have until June 30 to settle on the property, but they must be under contract by April 30 if they hope to collect their little piece of the government’s stimulus package.

Talking to agents around the country, it seems this tax credit incentive has had mixed results. Some swear it is boosting their bottom lines this spring, while others say they barely have noticed a blip on the radar. For my brokerage, personally, I can say we see it helped the first quarter of 2010 numbers, but not significantly.

Panic Buying?

I just went through the files of closed properties since the program started in 2009. We did see a handful of sales in September, October and November that we can attribute to the first time homebuyers program. A few I worked with personally were already looking and were prodded to get off the fence last fall with the $8000 incentive. Every one would have eventually bought, but they did so in the final months of 2009 thanks to the extra cash dangled in front of them.

When the tax credit was running out, we had a few buyers in a bit of a panic. They were rushing to find “the property” before the November 30 end, and may have taken their time if they knew the program was being extended, which it was. Besides being extended, the government wisely opened it up to non-first time homebuyers as well, although at a smaller credit.

December and January were a bit slow, then we saw an uptick in buyer activity again starting in February through April. This time we are not seeing many first time homebuyers. It’s the move-up buyers who are taking advantage of the drop in home prices around us, and the extra $6500 credit in their pockets.

Now there are less than three weeks left for these buyers to find a property, and again we see the panic setting in. Will they settle for “almost right” just to scoop up that credit money? Or will they take their time and miss out on the $6500? I know a few of our buyers who are likely to stop looking April 30 if we are not under contract by then.

With a Bang or a Whimper?

And that’s the great fear right now amongst real estate agents. Anywhere you have a group of agents talking, this topic seems to be hovering in the background. One today told me she’s scared to death her buyer traffic will fall off a cliff on May 1. Another told  me his accountant advised him to make sure he is stashing money away for the May/June/July drought that is coming.

Besides the expiration of the tax credit, we are sure to see rising interest rates, and many are predicting a double dip recession. What else could go wrong, if you’re a real estate salesperson?

Sure the strong will survive, and there were agents who made money when we had 14% interest rates in the late 80s and early 90s. The world will NOT end with a bang on April 30 as 5 p.m. approaches. But it just may whimper.

Buyer traffic may dry up and many agents already on the brink of getting “real jobs” may go running back to the corporate world. The herd will thin as it gets harder and harder to pay the bills and real estate closings become fewer and farther between. Already statistics are out there that only 20% of real estate salespeople make the bulk of their earnings from real estate. That means the other 80% already have second and third jobs.

Cold Turkey or Phase Out?

While I was not a big fan of the $8000 credit in 2009 when it first came out, I believe now that we cannot just cut the cord. I wish there was a phasing out of the credit, where we weaned buyers off it over the next 6 or 12 months. Cutting it off cold turkey is scaring both buyers (who are panicking if they haven’t found the right house yet) and the entire real estate community at large. Instead, phase it out over time.

That might still keep this real estate train chugging along, and not send the buyer traffic over that edge … and real estate agents following them like lemmings over that cliff.

Erica Ramus is the Broker/Owner of Ramus Realty Group in Pottsville, PA. She also teaches real estate licensing courses at Penn State Schuylkill and is extremely active in her community, especially the Rotary Club of Pottsville and the Schuylkill Chamber of Commerce. Her background is writing, marketing and publishing, and she is the founder of Schuylkill Living Magazine, the area's regional publication. She lives near Pottsville with her husband and two teenage sons, and an occasional exchange student passing thru who needs a place to stay.

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23 Comments

23 Comments

  1. Benn Rosales

    April 13, 2010 at 8:04 pm

    If the tax credit was life support for the economy then agent survival was only a side effect and never the intention. Agents shouldn’t be promoting the end of the credit and the hurry up and buy mentality because they are setting themselves up for failure. Instead, they should be promoting other helpful incentives and guidance on making the decision to buy when the buyer’s time is right. Hurry up and buy got us in this mess in the first place.

    I say pull the plug.

    • Jason Sandquist

      April 13, 2010 at 11:23 pm

      Agreed

      Down with the “hard sale tax credit” mentality

  2. Ashlee in Fort Worth

    April 13, 2010 at 8:06 pm

    It is amazing how many people are waiting till the last minute to decide to jump off the fence. Now us agents are having to run around like chickens with our heads cut off to find all these people homes! April will def. be a good month for sales!

  3. Erica Ramus

    April 13, 2010 at 8:07 pm

    Benn you are right. The buyers themselves seem to feel the panic. They want the credit and don’t want to lose the “free money” and yet they want the perfect house.

    I am no fan that this started in the first place, but now that it’s here the public is becoming dependent on it, like it’s another entitlement to them.

  4. Erica Ramus

    April 13, 2010 at 8:08 pm

    Ashlee — I think it’s human nature to procrastinate, or wait to see if something better comes along.

  5. Kathy Bibb

    April 13, 2010 at 8:36 pm

    Last year, I put some first time buyers in their first homes. I can honestly say that the extension of the credit into 2010 has been less than a blip on the radar screen. It has done little in this market to boost consumer confidence. With the job market and the economy being what it is, a tax credit is little incentive for folks who have little confidence in what their future may hold.

    • Erica Ramus

      April 13, 2010 at 8:48 pm

      Kathy–I can account for a handful of sales from it, but nothing significant. And most would have bought eventually, but had the extra incentive of the cash from the government. Nothing of statistical importance, in my book.

  6. Lisa Heindel

    April 14, 2010 at 7:42 am

    Despite agents touting the tax credit, NAR running ads and umpteen gazillion news reports, many consumers did not/don’t understand the credit, even today. I received a call from a potential buyer this week who asked me “don’t I get $10k from Obama?”

    • Erica Ramus

      April 14, 2010 at 10:10 am

      The funny thing is, LISA that the NAR “tax credit is extended” ads are still running. A client heard one this week and called to tell me the good news! It is confusing the public even more. That ad started running in November. Time to change the script!

  7. Fred Romano

    April 14, 2010 at 10:06 am

    I am happy the credit is ending… it’s all the tax payers filpping the bill to push newbie homeowners to buy and “keep the real estate market alive”, and it needs to end. People will still buy without it. Let’s end this nonsense spending… I sometimes think I should have voted for McCain 🙂

    • Erica Ramus

      April 14, 2010 at 10:12 am

      I wish it never had started, but it did. And now we’ve conditioned the buyers to expect money for buying a house. It’s their “right” now, like free money.

      I think weaning them off it is the smartest move, but I guess we’ll see what happens in May!

  8. Patrick

    April 14, 2010 at 10:23 am

    Tax Credit ending…when did it even start? Waste of time and money! Yikes…somebody needs his second cup of coffee!

  9. Jonathan Benya

    April 14, 2010 at 11:02 pm

    I think the tax credit was well intentioned, but what we’re anticipating is a sudden drop immediately after and then a return to better rates of purchase. The buyers that were planning to buy this summer are rushing to get it done now, but anyone looking to buy 6 months in the future isn’t allowing this tax credit to be a “purchase or bust” situation.

    Weaning the public off of it would have been a better option, IMHO, but we’ll see what happens in a few weeks!

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Austin

Austin tops the list of best places to buy a home

When looking to buy a home, taking the long view is important before making such a huge investment – where are the best places to make that commitment?

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Looking at the bigger picture

(REALUOSO.COM) – Let us first express that although we are completely biased about Texas (we’re headquartered here, I personally grew up here), the data is not – Texas is the best. That’s a scientific fact. There’s a running joke in Austin that if there is a list of “best places to [anything],” we’re on it, and the joke causes eye rolls instead of humility (we’re sore winners and sore losers in this town).

That said, SelfStorage.com dug into the data and determined that the top 12 places to buy a home are currently Texas and North Carolina (and Portland, I guess you’re okay too or whatever).

They examined the nerdiest of numbers from the compound annual growth rate in inflation-adjusted GDP to cost premium, affordability, taxes, job growth, and housing availability.

“Buying a house is a big decision and a big commitment,” the company notes. “Although U.S. home prices have risen in the long term, the last decade has shown that path is sometimes full of twists, turns, dizzying heights and steep, abrupt falls. Today, home prices are stabilizing and increasing in most areas of the U.S.”

Click here to continue reading the list of the 12 best places to buy a home…

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Housing News

Average age of houses on the rise, so is it now better or worse to buy new?

With aging housing in America, are first-time buyers better off buying new or existing homes? The average age of a home is rising, as is the price of new housing, so a shift could be upon us.

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aging housing inventory

The average home age is higher than ever

(REALUOSO.COM) – In a survey from the Department of Housing and Urban Development American Housing Survey (AHS), the median age of homes in the United States was 35 years old. In Texas, homes are a bit younger with the median age between 19 – 29 years. The northeast has the oldest homes, with the median age between 50 – 61 years. In 1985, the median age of a home was only 23 years.

With more houses around 40 years old, the National Association of Realtors asserts that homeowners will have to undertake remodeling and renovation projects before selling unless the home is sold as-is, in which case the buyer will be responsible to update their new residence. Even homeowners who aren’t selling will need to consider remodeling for structural and aesthetic reasons.

Prices of new homes on the rise

Newer homes cost more than they used to. The price differential between new homes and older homes has increased from 10 percent traditionally to around 37 percent in 2014. This is due to rising construction costs, scarcity of lots, and a low inventory of new homes that doesn’t meet the demand.

Click here to continue reading this story…

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Housing News

Are Realtors the real loser in the fight between Zillow Group and Move, Inc.?

The last year has been one of dramatic and rapid change in the real estate tech sector, but Realtors are vulnerable, and we’re worried.

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zillow move

Why Realtors are vulnerable to these rapid changes

(REALUOSO.COM) – Corporate warfare demands headlines in every industry, but in the real estate tech sector, a storm has been brewing for years, which in the last year has come to a head. Zillow Group and Move, Inc. (which is owned by News Corp. and operates ListHub, Realtor.com, TopProducer, and other brands) have been competing for a decade now, and the race has appeared to be an aggressive yet polite boxing match. Last year, the gloves came off, and now, they’ve drawn swords and appear to want blood.

Note: We’ll let you decide which company plays which role in the image above.

So how then, does any of this make Realtors the victims of this sword fight? Let’s get everyone up to speed, and then we’ll discuss.

1. Zillow poaches top talent, Move/NAR sues

It all started last year when the gloves came off – Move’s Chief Strategy Officer (who was also Realtor.com’s President), Errol Samuelson jumped ship and joined Zillow on the same day he phoned in his resignation without notice. He left under questionable circumstances, which has led to a lengthy legal battle (wherein Move and NAR have sued Zillow and Samuelson over allegations of breach of contract, breach of fiduciary duty, and misappropriation of trade secrets), with the most recent motion being for contempt, which a judge granted to Move/NAR after the mysterious “Samuelson Memo” surfaced.

Salt was added to the wound when Move awarded Samuelson’s job to Move veteran, Curt Beardsley, who days after Samuelson left, also defected to Zillow. This too led to a lawsuit, with allegations including breach of contract, violation of corporations code, illegal dumping of stocks, and Move has sought restitution. These charges are extremely serious, but demanded slightly less attention than the ongoing lawsuit against Samuelson.

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Last fall, the News Corp. acquisition of Move, Inc. was given the green light by the feds, and this month, Zillow finalized their acquisition of Trulia.

…Click here to continue reading this story…

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