Wednesday, April 28, 2010

2 Days Until Homebuyer Tax Credit Expires: Inventory Continues Growing At All Price Points

The Homebuyer Tax Credit has been a costly failure nationwide.  And it's not doing much to chip away the rising inventory in this area.  

In the Charlottesville Area Association of Realtors 1stQ 2010 Market Report, there was a note on the inventory number:
"As of this writing [April 12] we have 3,535 homes on the market, compared to 3,608 at this time last year.  This is the largest year-over-year decrease in several years, but we are still above the balanced inventory level in the 2,000 to 2,500 range."
So much for momentary lows.  As of noon, the inventory was at 3,600 for all of Central Virginia.   Currently, there are 267 single family listings in City of C'ville, and 862 single family listings in Albemarle County; the number is at 1,528 properties of all types, including fantasy "proposed."

The data for Weeks 1, 2, 3 of April may be found here.

No buyer?  Uh oh.  And more  uh oh. 

Related Reading:
BusinessInsider: Homeownership Now At Lowest Level Since Q1 2001
CalculatedRisk: The Latest Case Shiller Price Index Can't Be Trusted, According to Its Creators
CalculatedRisk: Real Home Prices and the Unemployment Rate
Meredith Whitney: On Goldman Sachs and the Coming Double Dip in Housing


rfs said...

Uh oh is right. If a seller has no ratified contract by tomorrow, looks like they will need to take a minimum of $6500 - $8000 off the listing price. Buyers are wising up and are generally well aware of the tax credit artificially propping up sale prices.

Anonymous said...

my estimate is the $8000 credit accounts for a willingness to pay up to $25,000 more for a property if its going to be mortgaged for 30 years.

Anonymous said...

@anonymous...I wish the average buyer were sophisticated enough to understand the future value of today's tax credit, but I don't think that's the case. You're giving them too much "credit" (pardon the pun).

@rfs...There are a lot of homes with inflated prices on the market, but I'm not sure they are inflated due to tax credit. There are also a lot of homes that are priced aggressively, and many of them are selling. As contrary as it may seem to the tone of this blog, I think we might be in the midst of a housing plateau that will transform into a slow, shallow, and steady increase in prices over the next several years. It will be years before we return to previous highs, but the worst may be over.

I know, I know: 14 scary charts, etc.

rfs said...

@anonymous 12:50:

I was not trying to say that prices are bloated because of the tax credit, but I do think once it expires, buyers will/should use the lack of the credit in their favor. Yes, sellers can stand firm or may need to stand firm, but really think prices will surely come down over the next few months. I am not at all convinced of a slow and steady recovery for PRICES, I am convinced that SALES will increase but absolutely not prices. Bank owned, Fannie owned, Freddie owned homes and short sales will climb, probably dominate the listings in the coming months totally pressuring prices southward. And if the rates DO actually start to climb, well...

anonymous5pm said...

@anonymous 12.50, you're 12.08 from the other day, aren't you? Give some evidence of the "many" homes selling and exactly why prices would increase.

Then I'll show you some pigs flying over Albemarle County. Hovering around all the listings for sale.

Linked off Realcentralva

'Your home is worth more today than it will be tomorrow, next week, next month, next year'

Humpty said...

@12:08 & 12:50

"As contrary as it may seem to the tone of this blog"

I'm not sure how to read the above comment. It makes us sound as if we have an attitude. Perhaps we do have a tone, but our tone is based on facts and figures. Those who question our tone have a tendency to make general and sweeping statements! Actually the kind of generalities some broker make from time to time! LOL

John Doe for the BB said...

@12.50, This area is not in the midst of a housing plateau. Parts of the United States may be-- though this is highly debatable--but this area is not.

Goldman Sachs (ok, evil, but they know what they're doing) showed that housing prices everywhere were inflated by 1-5% due to the homebuyer tax credit.

In Charlottesville you have to add in the "magic" that inflates prices, too. Whatever the "magic" is, whether it's the debunked "protected market" nonsense or rose colored glasses or inability to believe what's actually happening.

The number of foreclosures last year equaled 38% of the number of all houses sold. That's a gigantic shadow inventory that's coming back on the market at lower prices.

Then consider the growing foreclosure and short sales problems of this year.

If this area actually had a reliable, accurate, transparent reporting of sales and pricing, and if "distressed" sales were routinely used as comps, everybody would be singing a different tune.

CAAR has had a state government authority visit their sales people three times in the past year, telling them that this area is overvalued, that prices are out of synch with historic metrics, and that the bottom is sometime off.

The Virginia Housing Development Authority forecast is linked on this blog. Are brokers, agents, or sellers paying any attention to this?

Some are. Some aren't. But buyers sure are. But when sellers are not, they're choosing to ignore financial realities in favor of fulfilling other needs. Such as HELOCS or having paid too much a few years ago. Or just believing it's still 2006.

You gotta really dig that house to buy right now. Next month, next quarter, next year, it's going to be worth less.

The tax credit will boost some sales. But for the most part, it did very little for this market, even at price points where buyers would qualify. And the mid to upper ends of the market? Without no doc, no money down, cheap financing, it's DOA.

And Virginia, and Charlottesville, unemployment just went up a notch.

There's a plateau of "extend and pretend", but not of housing prices.

--John Doe on behalf of the bubble bloggers.