I say, let the first time buyers tax credit sunset, and go away. Why? What have we done?? For selfish reason I say "keep it going"!! However, we have now created a false market that will be directly impact 2010 and beyond. Here is how I see it. Recession is over, but we are looking at a jobless recovery. What that is going to create is more foreclosures. Those foreclosure will not hit the market until next fall, because folks are now just starting to default on their mortgages. Foreclosure is a 12 month process, and those who have not found work after losing their job this year, are the ones who are defaulting. We are a nation of spenders, instant buyers, just add water. What I'm saying is, as a nation we don't save, and in hard times we have nothing to fall back on. The only silver lining is, only 50-60% of the stimulus package has gone out, so in 2010 there will still be a flood of capital in the market place. However, companies have already cut back and they have the worker right where they want them. Working harder just to save their job! I bet if a productivity study was done right now, productivity would be way up!!
Everywhere I read, see on TV, or hear on the radio says the jobs are the last thing to recover after a recession. Why? Because companies go back to the basics and don't take the risk of growth. Some companies see these times as opportunity to get lean, cut excess, because they have an excuse. Blah, blah, Jason you are talking about the economy and not the housing market. This all effects housing market, but this is part of why I say let the First Time Home Buyers Tax Cut sunset.
Here is why:
1) The housing market, for the most part, has reset back to "normal" levels, and equity should be on a steady slow growth. Not what we had five years ago when we where seeing 10%, 12% and plus growth a year. That was a false market that was going to crash at some point, and it happened to be 2008-09.
2) The tax credit has created a same type of false market. Lots of first time buyers, but in talking to Loan Offerers, they are already see a growth in defaults for loan originated in 2008-09. I would bet that is coupled in job loss. My point here is, the tax credit has created this market of buyers, but I have to say that for the most part they are all used up. Buyers are still out there, but I'm hearing less and less about new buyers. This false market, first time buyers, will dry up and the 2010 market will contract.
3) Inventory is down, good inventory is gone, and the good new inventory won't hit the market until spring. Foreclosure inventory will rise next summer/fall, but before that look for the Short Sale market to increase next year as well. That sucks!! Short sales rarely, rarely close!! I had three short sales go "boom" right before my eyes..I couldn't do anything about it.
The saving grace?? The Federal Reserve!!
If the Fed keeps the key interest near zero, the rate at which banks lend to each other, that will keep the 30 year fixed rate down. Now, couple that with lower prices due to market correction, and buyers will still be able to purchase homes. The barrier to entry, down payment, is what concerns me as a Realtor. Buyers really don't have down payments, remember, we are a nation of spenders - not savers.
However, if we don't sunset the tax credit this year we will continue to create a false market that will crash even harder in 2011. If we get the foreclosures in the fall of 2010, coupled with a new deadline for a tax credit that runs through 2010, the housing market will crash HARD in 2011. And we are right back where we started. For the overall health of the housing market, economy..sunset the tax credit. It did it's job, now it is time to move on to a thin market, but a REAL housing market.
The selfish part of me says "NO!!!", but the practical side says "it's time for it to go".
Case in point.....Cash for Clunkers!
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