Tuesday, May 4, 2010

APRIL TAX-CREDIT MANIA RESULTS ARE IN: 27% INCREASE IN CONTRACTS OVER 2009

If it felt crazy, that's because it was.

I got my last "tax credit deal" under contract around 6:30 Friday night, roughly 5 1/2 hours before the end of the "tax credit era".  Over the past two years, I have helped over 35 first-time buyers take advantage of one of the three tax credits which first surfaced in April of 2008. 

During the final days of April, it was just plain nuts, with buyers scrambling as if they were playing musical chairs and sellers rushing to hurry homes onto the market.  With 6,616 homes under contract in April, we came within 44 homes of recording the largest sales month in the history of the Denver Multiple Listing Service.  And that happened with the most rigid, inflexible and credit-starved mortgage conditions I have seen in 16 years as a broker.

So now what?  What do things look like going forward?

For the next month or so, there will clearly be a hangover in the market.  With first-time buyers traditionally making up 40 to 45% of our market, the deck has largely been cleared.  Interest rates are still ridiculously low, helped by the tumult in Europe and widespread uncertainty about the health of our economy here at home.  The inventory of homes is also low, down more than 40% from the "high water" mark we reached during the summer of 2007.  So there aren't a lot of homes, and buyers are either under contract or exhausted.

Whether it was worth the $30 billion price tag is debatable, but the truth is the tax credit worked.  It picked up the housing market and created a bridge from recession to recovery, at least with the inventory at the entry level, which was unquestionably the most adversely affected by the first phase of the housing crisis.

The entry level has stabilized and recovered (with the exception of condos).  The soft spots in the market are now clearly at the mid-to-high end, but tax credits are not enough to revitalize the upper crust.  For that, it's going to take jobs.  And that is unquestionably where our focus should be going forward.