The question everyone is asking is, will the government expand, extend or simply let the $8,000 first time home buyer tax credit expire. With just over 50 days left until it is expires, the debate is on and everyone is anxiously awaiting the result.
Whichever side you take on the debate, what you can’t deny is the fact that nothing has done more in the past year to jumpstart our housing market more than the $8,000 first time home buyer credit. Will all of that come tumbling down if it isn’t extended or expanded on? It’s hard to say but I believe that if it isn’t expanded we will see a definite drop in first time home buyers in 2010 and probably a much larger emergence of investors in the entry level arena. While on the surface that may not seem troubling, it actually is. The fact is that investors purchase homes solely for income while first time home buyers purchase homes for lifestyle. When we have a balance between the two it keeps home prices relatively stable. If our entry level buyers are predominately investors, we could see a drop in home prices in this sector which isn’t good for a market that has already taken its fair share of hits.
While Congress continues to debate the issue, we as Realtors, are calling for support for the expansion of the tax credit from first-time buyers to all homebuyers, increasing the maximum amount of the tax credit from $8,000 to $15,000, eliminating the existing income caps for eligibility purposes and extending this homebuyer tax credit for one year from the date of enactment.
We believe that stimulating demand for housing—particularly in the repeat buyer market—is the most effective way for Congress to help lead the U.S. economy into a recovery and back on the path to growth. And we have to remember that it’s not just the entry level that is affected. The move-up buyer begins the process in building more demand in our mid-tier price points and ultimately our higher-end markets. Timing is critical and we hope that Congress is listening.
While the clock ticks and we await the results of the debate on Capitol Hill, let’s take a look at this week in real estate:
• East Bay—Berkeley reports a rather slow start to October, compared to our previous months. Anything priced $400-750k is getting lots of attention. Open houses were competing with a popular local street fair, but still garnered 45 to 30 groups at the newer listings. Castro Valley reports new construction in our area is looking up. Pricing seems to have normalized for new construction. Otherwise, we are still seeing lots of short sales. REOs are trickling through as well. We are starting to see the Castro Valley home median price range pick up somewhat. Fremont reports the market is typical for the Fall months as people prepare for school and holidays. REO properties are still hot, but have slowed a little too. Livermore reported during this past week active listings and total pending sales remained stable in both Livermore and Pleasanton. In Dublin, this past week, there was more than a 20% increase in listings, and a decline of 10% in total pending sales. $500,000 and below still remains very “Hot” with multiple offers. Walnut Creek reports very low inventory with multiple offers on almost every sale. Even with multiple offers, properties in the $600,000 – $1,000,000 range are not selling much over asking. Buyers are still very cautious, some not quite convinced that the market has hit “bottom.” REOs are barely trickling in.
• Monterey County—Things seem to be slowing down just a bit, though we have had some high-end sales of late, as the inventory of REOs is dwindling and the expected onslaught of new REOs has not yet materialized. Great mortgage rates we’re seeing right now may encourage another surge of sales.
• North Bay—The San Rafael office reports the under $300K market in San Rafael has slowed due to lack of inventory. In Novato the $300-600K price point is steady and the under 300K price point holding steady over the past few months. Cash is still king in bidding wars. Southern Marin reports listings are slowing down considerably. Sebastopol reports buyers are kicking tires at open houses. Listing activity is very slow.
• Peninsula—Burlingame reports appraisal problems are becoming more common and buyers demands are becoming excessive. The Agents are working so hard to hold their transactions together. The number of sales have picked up however and hopes are high for a strong Q4 finish. Half Moon Bay reports the price point is the only thing that matters in receiving offers on listings. Over the $1m mark is still very quiet. Menlo Park El Camino reports buyers are absolutely out there but come out of the bushes only when lured by a great house at a great price. We had nine offers, 25 offers, 6 offers – where are the 8 and 24 and 5 buyers that didn’t get the house? They will buy when the right house gets to the current market price. Redwood City/San Carlos reports one of the multiple offers was our listing and it was priced at $775,000—in San Carlos. There were five offers and it went $55,000 over list price. Three out of the five offers were very close. Moods seem positive. Woodside reported buyers are still on the fence for anything over $4 million. Almost nothing will lure them out. Under that level, it is price, price, price.
• San Francisco—Lombard reported truism reinforced this week: “Price it right, right out of the gate.” Buyers are writing right away if they see value and sense competition. But not returning to see the stale listings with the multiple mini reductions. Many sellers are still not getting this. Market Street reported that there was a lot to do around San Francisco over the weekend so open houses were a little less well attended than past weekends. However, those who attended were especially eager to buy before the end of the year. Van Ness reported both large and small deals are moving well. Activity level is picking up again.
• Santa Cruz County—The lower end market below $600K continues to dominate the lion’s share of sales. Agents are working really hard to keep deals moving forward and at times buyers continued interest in the property if escrows drag on. The Agents are still doing a lot of short sales, some taking months and months. The REO market especially south County – Watsonville – is almost completely dried up and those few actives are getting multiple offers – with cash buyers winning the bids.
• Silicon Valley—Cupertino reports we typically have a lot more sales than listings. Last week the numbers were just about even. Open house traffic was insane! Los Altos reports buyers are trying to find an affordable home in most cases and are competing in multiple offers with cash investors. Mid tier buyers have more time to consider and the upper end is slow. San Jose Almaden reports the market is tapering off a bit on the sales now, not by much but a little. Open houses remain very busy still. With rates as good as they are and inventory shrinking and tax credits ending I would expect more sales. Perhaps the upcoming weeks will prove this to be true. All sales made this week were multiple offers. Willow Glen reports multiple offers are still the norm and many of the Agents in this office have clients that are losing out. Inventory is somewhat down as well.
• South County—Morgan Hill reports each local market is unique and comes with its own set of challenges. Here in South County offerings on the MLS range from one-bedroom condos to huge estates on acreage. We have horse properties, PUDs, single-family developments and attached housing and everything in between. The buying public, for the last six months, has zeroed in on entry level housing (those homes listed under $500,000). That segment of the market is thriving.
MONDAY MORNING MARKET UPDATE WILL RESUME NEXT WEEK