Program that gives money to first-time homebuyers is ending Friday
Unfortunately for some, the government’s tax credits of $8,000 to first-time homebuyers or $6,500 for some others for buying another house require quick action.
The credits are part of the federal stimulus package created in 2009. The incentive was scheduled to end in November, but Congress extended it through Friday and eased some income limits and added the $6,500 credits for some people buying other homes.
To qualify for the credits, buyers must close by June 30 on purchase agreements signed by the end of the day Friday. They must keep the home for at last five years.
Local real estate agents expect a flurry of activity through Friday, but they don’t necessarily think the end of the tax credit program will cap a successful short-term run in the local market.
“I certainly think we will feel something when the program ends,” said Paula Carrier of Best Realty in Edgerton and president of the Rock-Green Realtors Association. “But overall, I think we’re headed in the right direction.”
Carrier and others said first-time homebuyers have certainly boosted sales numbers, but they are not the sole reason for the uptick in sales.
Investors also are flocking to the market as foreclosures continue to be high.
“There’s a huge group of investors, people who are buying properties and fixing them up to rent,” Carrier said. “Unfortunately, people are losing their homes to foreclosure, and they have to rent something. The investors are seeing that as an opportunity and are making plays to boost the rental inventory.”
From Jan. 1 through March 31, 309 Rock County homes and condos changed hands, according to the South Central Wisconsin MLS Corp. That a 26 percent increase over the first three months of 2009.
But while the number of sales has increased, the average price of the homes sold has fallen. At $106,319, the average sales price for the first three months of 2010 is 11 percent lower than the same period last year.
That supports conventional wisdom that the majority of sales have been to first-time buyers who typically enter the market with lower-priced homes. It also supports the idea that investors are scooping up foreclosed properties at bargain prices.
“In the first quarter of 2010, we didn’t see a closing in Janesville on a property over $250,000,” said Randy Borman, a principal at Coldwell Banker Success Realty in Janesville.
“While the tax credit program will end, I don’t think the foreclosures and investment part of it will end any time soon. Still, we’re starting to see a little more interest in the higher end of the market.”
Julie Press-Raese of Coldwell Banker Success agreed.
“I think the first-time homebuyer program has opened up the market and will allow sellers to move up,” she said.
She had three closings last week that involved first-timers and sellers who were buying more expensive homes.
Press-Raese said she’s been busy since December. About 50 percent of her business has come from people taking advantage of the tax credit.
“For a lot of these people, I just think the time was right, that they would have bought without or without the tax credits,” she said.
Terry Briggs of Briggs Realty Group in Janesville had three well-attended open houses on Sunday. He made a point of asking visitors whether they were trying to scramble to beat Friday’s deadline.
“The majority said they weren’t,” Briggs said. “They said it would be nice to get, but they weren’t going to just buy something in order to get $8,000, $6,500 or whatever.
“That was very encouraging to me.”
Briggs believes sales will continue to improve and that he and his colleagues are on track for a banner year.
“I was talking with our office manager this week,” Briggs said. “She said that at this time last year, she was wondering how she was going to keep her job.
“Now she’s wondering how she’s going to keep up.”
Local inventories are strong, and interest rates continue to be favorable, agents said, adding that prices remain in reach.
How long that continues is anyone’s guess. At some point, an economic recovery will be needed to continue the recent trends in the real estate market.
“From an economic perspective, I think things are starting to improve, and maybe it never got as bad as was predicted,” Borman said. “I think people are starting to realize that interest rates and prices aren’t likely to stay where they are forever, so why not take advantage of it?
“Little by little, we’re starting to see some improvement.”