Tax Credit Helps Homes Sales Increase

April 24, 2010

Home sales increased in March in all four regions of the U.S., led by a 44% increase in the southern states.  Demand for existing homes could remain elevated through the end of this month as more first time home buyers try to take advantage of the first time home buyer tax credit which will end April 30th.  Buyers attempting to benefit from the tax credit must have all paper work completed by the end of the month and must close escrow on the property by July 1st.

The first time home buyer tax credit, which was extended last year, can benefit first time home buyers (or those who haven’t purchased a home in the last three years) and also include those who have a home but are ready to trade up to benefit from the tax credit of $6500 extended to existing home owners. The sale of previously owned homes accounts for 90% of the housing market and is tabulated at contract closing which could account for increased numbers of home sales into the month of April.

Reports last week reveal that builder confidence is growing, even in the light of legal matters like those that face the former CEO of KB Home based in Los Angeles.  Bruce E. Karatz, also the former chairman of the board of KB Home, was found guilty on Wednesday of fraud in connection with covering up a stock-option backdating scheme that resulted in millions of dollars in extra earnings for himself and fellow company executives.  Backdating is not illegal, but when backdating is done the company must take an expense for the difference between the current stock price and the price at the earlier time. The crime charged is that the company did not declare this expense and therefore falsified its financial statements.

Foreclosures will remain a sticking point for the housing industry after the expiration of the tax credit benefits.  Those homes that still remain in the foreclosure pool and those on the verge of entering will determine the health and climate of the housing market moving forward.  Foreclosure filings rose 16% in the first quarter over last year and bank seizures reached a record high according to California based RealtyTrac Inc.

Ken Mayland of ClearView Economics, while commenting on the foreclosure forecast stated, “Foreclosures are an overhang that needs to be absorbed and until it’s absorbed, it’s going to be depressing on starts and new-home sales”.  The summer sales season should give experts a clear view of the housing market direction, a direction I believe will be much slower and hopefully more sustainable for those in and entering the market.

Related posts:

  1. Mortgage Delinquencies Continue to Increase
  2. California Housing Woes To Continue
  3. Existing Home Sales Decline
  4. Qualifying For The New Foreclosure Relief Program
  5. Lenders Want More Credit Information

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