Home Buyer Tax Credit is Extended and Expanded!

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In my last market statistics post , I mentioned that an extension of the $8,000 first time home buyer tax credit would be a real incentive for people to continue buying even in this traditionally slow time of year.

Congress must have been paying attention (or I tripped on something that other people agreed with!) and the $8,000 Tax Credit was extended this week. In addition, people who have owned their homes for 5 consecutive years (out of the last 8 years) can now get a $6,500 tax credit when they buy a new home.

With the threat of higher rates in the first quarter of 2010, and affordable houses all over the Philadelphia marketplace (which includes South New Jersey and the surrounding counties) , now may be that perfect moment - if people don't get too complacent about the housing market and assume that they'll still be able to reap the maximum benefits from the convergence of rate, price, and tax credits. I guess the only way to find out what the public's reaction will be is to wait and see -

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Housing Starts Post 8th Gain in 9 Months

Housing Starts on single-family homes gained last month, marking the 8th time that's happened this year.

A "Housing Start" is a home for which the foundation has been excavated and, considered alongside other key market metrics, September data suggests that the housing market stabilization is complete.

Momentum in housing is overwhelmingly positive:

• Homes under contract are soaring
• National home supplies are way down
• Home values are up in a lot of markets

Despite the positive news, the press is calling September's Housing Starts data a "bummer". Citing a drop in monthly building permits, the media purports that housing will slow in the months ahead.

The conclusion may be right, but the rationale may be wrong.

The probable cause for fewer permits isn't that the housing market is overdone. It's that home builders are choosing to exercise caution given the pending expiration of the First-Time Home Buyer Tax Credit and a still-growing number of foreclosed homes.

It's unclear what housing demand will be beginning in December and the last present a builder wants for the holidays is an excess of inventory.

It makes sense that building permits are down, in other words. In our marketplace, where new homes are not the most significant part of the housing inventory, unlike primarily new home communities like areas of Nevada, a Florida, the increase or decrease of housing starts may be less significant in any case.

Looking back at February of this year, there's a host of signs that housing is on the path to recovery. Now, that path won't be a straight line and there's bound to be setbacks, but September's Housing Starts is not one of them.

Housing Starts are up 40 percent on the year. WHich does indicate that ate the very least we have passed the bottom of this contraction.

If Demand is Up and Supply is Down - Are We Starting to Recover?

Statistics are what you make of them, but sometimes, they can provide good perspective.

For example, from its peak in 2005 to its trough in late-2007, the number of "used" homes sold nationwide plunged.

• In 2005: Roughly 7 million homes sold annually
• In 2007: Roughly 5 million homes sold annually

Through all of 2008, though, Existing Home Sales volume has been essentially flat. Some months up, some months down, but always hovering near the 5 million unit mark.

The data from September is no different.

For the 13th consecutive month, the number of home resales nationwide straddled the 5 million benchmark, clocking in at 5.18 million units. This tells us that everyday Americans are still buying and selling real estate at a fairly steady clip -- despite what the news keeps telling us.

Versus August, September sales volume grew by 5.5 percent.

Now, couple this two other data points and we can see that the housing market is showing multiple signs of strength:

1. The national home supply is now down to 9.9 months
2. The number of homes under contract is up 7.4 percent

Again, though, statistics are what you make of them. Just as there are positive signals about real estate, there are negative ones, too. The credit markets are one example of that.

But, either way, with a full year of stable sales volume behind us and stories of recovery in beat-up markets like California, we can't ignore the idea that housing may be done trolling its bottom.

It takes willing buyers and willing sellers to turnaround a market. It appears that housing may have both.

(Image courtesy: The Wall Street Journal Online)