But that's a huge problem here and elsewhere: lack of move-up buyers. This blog noticed the phenomenon in the past in this post, and in another post about listings which had sellers who were not going to "move up."
While the second post was a one-week snapshot of new listings, the problem persists: those who are selling in this area for the most part fall into one of these categories:
1. seller is leaving town for a new job
2. seller is leaving town after a UVA program or residency ended
3. property is for sale by a trustee due to owner death
4. seller is retiring or ill and downsizing
5. seller has been in the property about 5 years--there's an Option ARM resetting
6. seller wants to unload an investment property
7. the property is REO or short sale
8. seller is trying to downsizee before a foreclosure or shortsale
And--oh, yeah--then there's price.
After excluding the above sellers, there's a handful left over confronted with the prices of "move up" homes. A tax credit of
With the current tax cred and an FHA loan, $8K can essentially cover the 3.5% down payment for a "starter home" of up to $230K. Even so, 2009 sales were already below 2008 sales here, despite the tax credit and low mortgage rates. Look at City sales for an example. According to Nest Realty Group,
- 69% of all transactions through Q3 were $325K or below
- Nearly 2/3 were $250K and below
As this blog pointed out the other day in response to The DP's
That principle is: the US government is busy actively raising home prices. And there we are back to what I've been saying about Fannie and Freddie for the longest time. While the reason given by Washington is that its involvement is driven by a desire to "stabilize" the markets, that is at best only part of the truth. What the White House and Capitol Hill are trying to do is "stabilizing" the markets at a level that they find acceptable. Which, if we recognize that their policies increase the number of homes on the market as well as their prices, evokes the image of a hamster on a flywheel. And that hamster WILL get tired at some point.
Who loses in this set-up? First, homebuyers, since they pay much more for their homes than if the government would stay out of the market. Then again, what obligations do the buyers really have? They get a home for free, more or less, and often with a non-recourse loan to boot. In the end, the by far biggest losers are the American taxpayers, who have to watch helplessly as their own chosen government shifts a fast increasing share of the losses of the housing market onto their tab, all solely for the benefit of the one and only party that stands to profit.
That is, the banks. Which can unload repossessed properties at much higher prices, given the tax credits. Which can keep properties and loans at greatly elevated prices on their books, which allows them to fool their shareholders and depositors into thinking they are far more healthy than they would be without government involvement. Who can use the artificially raised "values" on their books for highly leveraged financial wagers that if they pay off allow for multi-billion dollar bonuses, and if they don't can be channeled back to the taxpayers' account.
Updated Details...CR notes this can be used for "move down" buyers as well.
The Details of the Tax Credit Extension
US Senators Near Deal (Thanks, anon)
Uncle Sam Adds 5% w/ Tax Credit