Home sales along the Wasatch Front are up dramatically so far this year, but what happens now that a federal buying incentive of up to $8,000 is expiring?
Certainly, the federal tax credit -- along with low mortgage rates -- played a leading role in pushing up sales of single-family homes in the first quarter. Although prices continued to fall, sales in Salt Lake County rose by 15.3 percent and condo sales by nearly 27 percent, compared with the same period in 2009.
Exactly how many of the buyers of 1,716 homes and 350 condos that changed hands in the first three months will claim or have claimed the credit isn't known, but it could have been as high as a third, said Bill Heiner, president of the Salt Lake Board of Realtors, which issued its home-sale report Tuesday. 'I know it increased the activity a ton,' he said.
According to IRS data, more than 21,670 Utahns have collected $161.4 million in federal home-buying tax credits on returns processed for the 2008 and 2009 tax years. To qualify, buyers must go under contract by April 30 and close by June 30.
Trae and Dave Cramer of Taylorsville, who made an offer on a new home Monday, are hoping to snag a $6,500 credit for repeat buyers, even though their time is quickly running out. 'It would be great if we could get it,' Trae Cramer said.
Many Realtors, who saw the tax incentive create an urgency among buyers, fear sales will suffer now that it is expiring.
To help cope, Coldwell Banker is starting a promotion May 1 in which sellers working with the company have the option of providing an incentive of as much as $8,000 to prospective buyers. The incentive will be in the form of a credit at closing, said Dan Christensen, president of Coldwell Banker in Utah.
Whether this incentive, which would be offered for three months, will be of real benefit to buyers remains to be seen, because some sellers may adjust their asking prices upward to reflect the extra amount they would pay in the form of the credit.
Although the federal tax credit is widely recognized for boosting sales in Utah and nationally, it wasn't powerful enough to stop prices on single-family homes along the Wasatch Front from falling over the past year.
Although condo prices appear to be stabilizing, the median price of single-family dwellings in Salt Lake County in the first quarter was down 8.8 percent year-over-year, to $217,000. Prices were down, as well, in all the other Wasatch Front counties (Davis, Utah, Tooele and Weber).
But an increase in sales alone is a positive sign, said Heiner, who is hopeful there won't be a steep drop-off the rest of the year. 'I think there will be life after the tax credit,' he said.
He points to mortgage rates, which remain comparatively low, although they are inching up. And homes generally are more affordable now than they have been at any time in the past three years.
Andres Carbacho-Burgos of economic forecasting firm Economy.com agrees with Heiner's assessment, saying the tax credit is expiring at a time when the Utah housing market should be starting to recover on its own.
But the pace will be slow and not very strong at first, he said. Carbacho-Burgos thinks sales could dip slightly in the third quarter, reflecting the tax credit expiration, but should stabilize afterward.
'Prices of course are another story,' he said. 'We don't expect the median home price in Utah will bottom until the end of this year or the first couple of months in 2011.'
That's why the Cramers, who made an offer this week on a new home, consider themselves lucky. The couple, who had their existing home on the market for two months, originally listed it at $157,900. Despite the fact they are surrounded by foreclosures and other distressed properties selling at a discount, they had to cut the asking price by only $3,000 to find a buyer. It's under contract for $154,900.
'It was really nerve-racking,' Trae Cramer said. 'There are so many homes for sale right now. In our neighborhood alone there are at least five or six.'
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