Does End of Housing Credit Signal End of Sales Increases?
May 24th, 2010 categories: Economic Recovery, Housing Market, Real Estate News, Taxes
I was a big fan of the federal government’s first-time and move-up home buyers’ tax credits. The housing statistics bore me out, too: Both of these tax credits – up to $8,000 for first-time buyers and as much as $6,500 for move-up buyers – helped boost housing sales. This year, for instance, housing sales in Chicago continually rose. This isn’t all because of the tax credits, but they certainly helped.
Unfortunately, both tax credits expired at midnight on April 30. It’s been nearly a month, then, since their demise. How has the end of the tax credits impacted housing sales? It’s too early to tell definitively, but the Chicago Tribune last week reported on at least one grim omen that suggests that the demise of the credits might have a negative impact.
According to the story, the Mortgage Bankers Association reported that mortgage loan applications for the week ended May 14 fell 27 percent from the number of applications completed one week earlier. According to the bankers, applications for the week reached their lowest level in 13 years.
In even more disturbing news, the bankers reported that mortgage loan applications have dropped nearly 20 percent for the month of May.
The Tribune story also pointed to a report earlier last week from the U.S. Commerce Department. According to that story, while housing starts did rise in April – that’s good news – the number of building permits dropped 11.5 percent. That represents the lowest that number has stood since October of last year. This is significant because housing permits represent future activity.
Of course, you can’t blame all of these potentially negative signs on the end of the housing tax credits. A lot of people have bought homes in the last six months; maybe it’s time for a bit of a natural slowdown.
If I had my way, though, Congress would have extended both credits. The housing market’s recovery, both in Chicago and across the nation, is still a tentative one. Anything that can give it a boost, including the first-time and move-up-buyer tax credits, should be used as a tool to keep the housing recovery’s momentum going.
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