Buyers Hustling To Close On Homes Before Tax Credit Expires
Written by Yudislaidy Fernandez on April 8, 2010
By Yudislaidy Fernandez
With the federal homebuyer tax credit to expire soon, more buyers are hustling to close on a home, taking advantage of lower interest rates and the credit incentive, real estate professionals say.
But one realtor says with some banks slow to approve mortgage loans, some buyers are getting discouraged that they won’t close in time to get the $6,500 to $8,000 tax credit.
Pressure to jumpstart the national housing market, coupled with intense lobbying by major national associations, prompted Congress in November to approve a six-month extension of the $8,000 first-time homebuyer tax incentive and to expand it to current homeowners at a lower credit of $6,500. All buyers have until April 30 to have a contract in place and until July 1 to close.
Sherrie Porter, senior vice president and general sales manager of national realty firm Esslinger-Wooten-Maxwell Realtors in Miami-Dade, says associates are seeing increased sales activity fueled by the homebuyer tax credit and lower home loan rates in combination with more competitive prices and a shrinking inventory.
As of February, 24,218 properties were for sale in Miami-Dade as opposed to 37,544 in February 2009, a 32.2% decrease in inventory, according to the Multiple Listing Service, also known as MLS.
Of those, 1,349 properties have closed versus 1,251 last year, a 7.8% rise in closed transactions. Pending sales are also up 58%, with 3,039 listings under contract compared to 1,923 during the same period last year.
EWM’s closed sales rose 46% in the first quarter compared to the first quarter of 2009, and pending sales — transactions under contract that haven’t closed — are up 42% for the period.
The sales numbers are encouraging, Ms. Porter says, especially for the year’s first two months, which generally are slow.
The firm’s total closings rose 10% from February to March, she noted.
Lower mortgage interest, hovering around 5%, and the approaching deadline for the buyer tax credit are two major factors incentivizing buyers to close the deal, Ms, Porter says.
Many buyers are "motivated to do something before April 30 whereby otherwise they would have taken longer and not been in a rush to make something happen," she explained.
Companywide, EWM’s focus on educating sellers on the importance of accurately pricing homes has led to significant price cuts.
For example, from Feb. 5 to March 25, the firm recorded 296 price reductions within its listings, totaling a combined reduction of $24.7 million, slashing each listing almost 10%, Ms. Porter noted. The reduction led to 51 contract signings during the two months.
With a second extension of the homebuyer credit unlikely, concerns are rising about the impact the incentive’s end will have in a still-recouping housing market.
Some brokers say other motivates, such as lower home loan rates, discounted prices and a reduced inventory, should continue to drive buyer demand.
Plus, the housing market is entering its peak season, says Realtor Terri Bersach, chair of the Realtor Association of Greater Miami and the Beaches.
The tax credit program’s extension and expansion in November, Ms. Bersach said, was crucial to maintain buyer activity, since home sales typically slow down during the holiday season.
But with the second round expiring as the home buying peak season takes off in spring and summer, Ms. Bersach doesn’t foresee home sales falling.
"We are seeing a lot of activity in the market all around," said Ms. Bersach, manager of national realty group Coldwell Banker’s Weston office. "The momentum kept building and now it takes us into the peak of activity months."
The homebuyer tax expansion has proven successful in enticing more buyers to leap into homeownership, says Realtor Martha Pomares, but delaying in the loan-approving process could prevent some buyers from getting the tax break.
"The problem we are facing running into the last month (of the tax credit extension) is that the banks are not responding fast enough to expedite the contract in order for the buyer to take advantage of the tax credit," said Ms. Pomares, owner of Miami-based New Image Realty Group.
The delays — in some cases up to five months — are discouraging some prospective buyers from rushing to buy because they feel they’re going to miss the tax credit deadline.
Ms. Pomares says she believes the volume of foreclosure filings has overwhelmed lenders who didn’t have systems or personnel in place to handle the load and hassles associated with this legal process.
Distressed properties comprise more than 40% of today’s housing market. A total of 9,817 foreclosures and short sales were tallied in the market in February, fewer than the 14,159 at that time last year, the MLS shows. Overall, 60% of closed sales right now are short sales and foreclosures.
The homes selling faster, mainly single-family and townhomes, are those priced under $300,000, Ms. Pomares noted.
Many buyers who’ve been taking advantage of the credit incentive are reinvesting the dollars back into their newly-bought residences, she says.
Several buyers Ms. Pomares has helped — from first-time buyer couples to families upgrading to bigger homes — are using the money to make home improvements, such as adding wood floors, putting in new tile and remodeling the kitchen.