The $8000 credit just ended. While contracts had to be written by the end of April, closings had to happen by the end of June. (now extended for those who had contracts)
We are likely to have much fewer first time buyers starting today. However, home prices are sticky, sellers don’t just immediately drop their prices the instant the market changes, it takes them several months to start dropping prices.
So, what do we have today?
1. Prices still higher due to the effect of the $8000 credit.
2. Less supply, because many contracts were written to make the credit deadline
3. More supply coming, foreclosures still occurring at record levels.
If you are a buyer, I would seriously consider waiting a good 6 months, to let these factors take effect. Continued foreclosures, with less first time buyers will inevitably build up inventory on the market, meaning the market is coming your way.
Since the credit ended, what have we seen?
1. 30% drop in loan applications for owner/buyers.
2. 30% drop in new home buying.
3. 30% drop in pending contracts to buy homes.
Pretty consistent evidence isn’t it? Most seem to assume that at worst we will have ‘a bad month or two, then the market will return.’ But is that reasonable? We have now had over a year of credits to encourage first time buyers, isn’t it possible that we really don’t have that many first time buyers left? Personally I think we will have much fewer first time buyers for at least a year, and that spells doom for a market that has seen a 100% increase in delinquent mortgages in just over a year. So unless you are buying a home that costs much less than renting each month, you are taking a very large risk buying today.
Remember me when you get ready to buy and sell:
Roberto A. Ribas Homesmart Realty