Wednesday, June 9, 2010

The Homebuyer Tax Credit: Single Family Home Contracts Jump in April, Plunge 50% in May For C'ville and Albemarle, Drastically Below Earlier Years

This area followed the national trend of bumped-up contract signings by April 30 for the expiration of the Homebuyer Tax Credit, with a reactive decline in May.  

Fannie Mae's Chief Economist noted the tax cred shifted demand forward but did nothing to change the market, even while creating momentary, unsustainable price appreciation.

Experts say up to 20% of pending contracts nationwide will not close.

EVEN WITH THE FED GOVERNMENT SUBSIDIZING MORTGAGE RATES AND OFFERING UP TO $8k CASH VIA TAX CRED, SALES CONTINUE TO DECLINE IN THE AREA: below is a chart showing pending contracts for the Charlottesville MSA during May 2010; this includes Charlottesville, Albemarle, Fluvanna, Greene, Nelson: Contracts decline over 2009.

Chart shows a -55% decrease from May 2004 to May 2010. (Click for larger image in new window.  Chart via RealCentralVA.com)

CHARLOTTESVILLE ALBEMARLE DEMAND RISES: April 2010 single family home pending contracts rose +/- 36% (reading April 2009 as 110 and April 2010 as 165).  (Click for larger image in new window. Chart via RealCentralVA.com)
CHARLOTTESVILLE ALBEMARLE DEMAND DROPS:  Pending contracts for single family homes in May 2010 fall about -30% from May 2009, even though last year was the middle of the "Great Recession" (reading the chart as 120 in 2009 and 85 in 2010).  (Cick for larger image in new window. Chart via RealCentralVA)
BELOW: When April and May are combined, a slightly higher tax-credit bump-up emerges: about 25 more contracts in 2010 than Recession 2009.  And both years are still less than every year going back to 1999.   Not really sure what the focus of this chart is from RealCentralVA, btw.  Is it supposed to suggest that, going forward through June and July, contracts will rise?  The previous two charts showed the rise to be correlated with Federal Government Subsidies. Still, June typically has more sales than April, as this area is more tied to school year than many.  (Click for larger image in new window. Chart via RealCentralVA.com)

As noted in May, the Homebuyer Tax Credit did nothing to increase Q1 closed sales of single family homes in the City of Charlottesville, which were the same as 2009 and  43% lower than 2008.  It did, however, have an impact on Albemarle County single family home sales, which rose.


Inventory will continue rising, and since there are so few buyers, short sales and foreclosures will rise, too.  Read a full area forecast here.  (Declines are inevitable unless, of course, cash starts raining from the clouds; anything's possible, it's just not probable).

Charts are via/copyright RealCentralVA.com. 

See also: June 2010 Inventory and C'ville Asking v. Selling Prices.


Related Reading: 
America is Fantasyland
CNBC: Housing Double Dip a Done Deal
Zillow: No Housing Bottom Yet

11 comments:

rfs said...

MBA purchase applications down ANOTHER 5.7% last week and even the refinance index was down 12.2% even with the lowest rates on record. Boy the fit is really starting to hit the shan...

John Doe said...

Mortgage apps down 35% from 4 weeks ago. Lowest since FEB 1997

http://www.calculatedriskblog.com/2010/06/mba-mortgage-purchase-applications_09.html

Humpty said...

What should I ask my real estate agent before selling?

I wonder how most realtors in C'Ville would answer the following?

1. What is the average listing prices for houses of this age, size and location?

2. What is the average selling price for homes of this age, size and location?

3. How long has the average home been listed before selling?

4. How many homes are currently on the market?

5. How many homes were on the market one year ago? Two years ago? Three years ago?

6. What was the average selling price for homes of this age, size and location last month? Three and six months ago? A year ago? 10 years ago? (Remember, there are seasonal and cyclical fluctuations to consider).

7. What is the percentage of owner occupied versus rental homes in the area?

8. Are there any large neighborhoods or communities in development?

9. What is the average household income in the area? Age? Is the area growing, stagnating or decreasing?

10. What has been the rate of appreciation or depreciation in the local market for the past one to five years?

***********************************

What Real Estate Market Data Should I Know Before Buying?

1. Is the population growing, stagnating or declining?

2. Is the local economy healthy?

3. What is the ratio of rentals versus owner occupied? Areas with very high rental rates can translate into higher insurance rates, lower resale values and potential difficulty in obtaining financing at later dates.

4. What is the foreclosure rate in the local community? How many sales have been "short sales"? Compare the volume of sales for recent years and look at the trends.

RFS said...

Inventory count is at present HIGHER than last months ending inventory per the CAAR site. Why are folks listing NOW when everyone and their brother KNOWS its really not a good time to sell? Maybe because they think THIS is the best time for the foreseeable future?

John Doe for the Bubble Blog said...

rfs, "10 housing lessons we have not yet learned" is linked below.

#4 is completely ignored in this area: "where you live is not different". There's still an idea that this area is "different," better, special, worth the $.

http://bayarearealestatetrends.com/2010/06/10-housing-lessons-we-have-not-yet-learned/

So is it the impulse you mention causing people to list now, or is it just an arrogance connected to #4? or ignorance?

John Doe for the Bubble Blog said...

Inventory: last year in May:

There's about 30% MORE single family homes on the market this year over last in Cville and Alb...but inventory #s are about the same:

http://realcville.blogspot.com/2009/05/central-virginia-mls-milestone-3700.html

See comment #1 after this post for inventory for 2008 (and try not to laugh too much at the quoted article)

http://realcville.blogspot.com/2008/06/sweet-deal-for-homebuyers-daily.html#uds-search-results

Good questions for buyers or sellers. A question to ask when buying in the City is WHY ARE SALES SO LOW IN CHARLOTTESVILLE?

Montpellier said...

RFS - I think it's because they have no choice! Jim's comment about the increase in the number of vacant properties on the market is kind of telling: people can only "wait out" the market for so long. Taxes alone in this MSA make for brutal carrying costs.

Moreover, we are only now moving into the peak of the infamous "Arm Reset" period, so there are a surprising number of these wait-it-out folks who've been somewhat insulated by their rather low payments. Even given that rates are super-low, nobody underwater can re-fi and those resets do hurt.

http://www.calculatedriskblog.com/2010/03/new-credit-suisse-arm-recast-chart.html

I smell capitulation...forced. C'ville is pretty full of these crazy instruments (since nobody around here really earns enough to support these price levels).

If it were just that people are bailing now before it drops further, they'd be pricing realistically to move the properties.

Real C'ville - The Bubble Blog said...

Jim's current post on vacancies

http://www.realcentralva.com/2010/06/10/vacant-homes-for-sale-in-charlottesville-and-albemarle-june-2010/

and "Thursday links" about appraisals, buy v. rent, etc.

http://www.realcentralva.com/2010/06/10/thursday-links-10-june-2010/

Anonymous said...

seriously, wtf is going on in the City?

oh yeah, it's this kind of thing: asking price nearly $300k then reduced $15k on a place that needs $100k to enter the 21st century

"a wonderful older home waiting for a rehab"

http://www.trulia.com/property/3009960546-1450-Rutledge-Ave-Charlottesville-VA-22903

Anonymous said...

Proof that recession's not over in this area! ;)

http://www2.dailyprogress.com/cdp/news/local/article/golden_corral_to_close_doors/57111/

Anonymous said...

Oh, man, I don't know that THAT's proof of a failing economy--have you ever BEEN to that Golden Corral? It wouldn't be hard to construe its closing as a positive. Ugh.