Market Conditions: The Tax Credits End Today
Sorry for the lack of posts but my computer has died (only 4 months old!) and is in the shop being repaired. Regular posts will resume on Monday.
Meanwhile, the first time home buyer and move up tax credits come to an end today. News outlets around the country are reporting a surge of buyers coming in at the last minute to get in under the deadline.
Here in Chicago, the sales center at 565 Quince in the West Loop is staying open until midnight in order to handle any last minute buyers.
What will happen tomorrow and in the month of May now that the credit is going away?
In March, over 40% of home sales nationwide were first time home buyers.
Glad to hear you are OK. Had conjured up all sorts of thoughts that you might be sick or dead.
It’s absolutely crazy. Getting multiple offers on some listings. Lots of people who were on the fence have come down. Lots of last minute showings for people who are intent on writing by today. I’m going to analyze the data this weekend. No doubt business will die starting Saturday and some buyers have purposely waited to take advantage of that. It’s cash for clunkers all over again.
Ugh! Having trouble posting here. Going into spam folder for some reason. Let me try this with a different web address.
It’s absolutely crazy. Getting multiple offers on some listings. Lots of people who were on the fence have come down. Lots of last minute showings for people who are intent on writing by today. I’m going to analyze the data this weekend. No doubt business will die starting Saturday and some buyers have purposely waited to take advantage of that. It’s cash for clunkers all over again.
40% of buyers being first time buyers is actually normal
I noticed that the grossly overpriced townhouse in North Center, that I’ve been watching for months, went under contract after being on the market for about 250 days. I’m dying to see if it really closes and for what price.
been watching a place, talked to teh broker this week. said the seller accepted an offer but the loan was FHA and he didnt really think the financing would go through. im viewing the unit tomorrow. looks like it was most like a first time buyer who prob shouldnt be buying (hence the FHA loan) and trying to get it in before 4.30.
Yeah, I think that a higher percentage than normal of these contracts will not close.
It funny to hear that all these people are scrambling to make it in time before the obama coupon expires.
do people realize that after the coupon is gone for 3 months it will make it easier to negotiate an extra 10k off your offer if not more? 8.5k or 10k+ which one do want?
Gary,
do you have a chart or link to what price range First time Home buyers are jumping into with the credit?
I really dont see FTHB scooping up the 500k+ segment. But gary your in the biz and can tell me if my arm chair prediction is on the rigt track.
i am with groove; it doesn’t matter; I think next winter would be a good time to buy, with the seasonal low vol.
on the other hand with many places going under contract and that process taking time; some sellers might find it a good time to enter the market to sell; (the mid market (not affected by 8K); as inventory of quality places is lower than normal;
“I think next winter would be a good time to buy, with the seasonal low vol”
also on the other hand i wonder how many people just take the place off the market before winter and comeback in spring or “selling season”
I guess that would be another question for gary?
also does anybody think that while the obama coupon, is a sort-of good idea, but feel that is propping up the lower price market (350k and under) and keeping those prices still inflated?
My Fiance and I have been looking since January. We’ve both come to the conclusion that the tax credit is hurting us. Most of the places we’ve put offers on have refused to come down in price. Just because they bought a 2bed/2bath in 2007 for $400K + doesn’t mean its going to sell for that amount in today’s economy. So, we are going to look for another month and then throw in the towel and rent for another year. Of the places we’ve put offers on, we have already told them that our initial offer will drop $8,000 on May 1st.
Gary Lucido! Heard you on NPR this morning. Wonder if that woman is cute. I always wonder that about radio personalities on NPR.
I’d like to be able to see some data like 2 years down the road that would tell the percentage of defaults of people that bought from 4/25-4/30 vs. more “standard” defaults. RARR FREE MONEY GOING AWAY MUST BUY FIRST THING I SEE
Why people would essentially impulse buy a house because of $8k (which is a drop in the bucket in the grand scheme of any house purchase) is beyond me.
The “obama coupon” never was a good idea. All it did was enable more careless FHA lending while providing artificial support for prices.
Now, thanks to letting that credit be “monatized” by letting it be used as a down payment at the close, and the FHA’s loose lending standards, we’re now rigged for another credit blowup and ensuing bailout. The combined delinquency and default rate for recent vintage FHA loans (last two years) is a staggering 24%.
I see another monster bailout on the horizon.
“Now, thanks to letting that credit be “monatized” by letting it be used as a down payment at the close,”
very very very few lenders and states were allowing this
Gary, I heard you on NPR too. Fascinating to learn you’ve been a renter for the last 11 years. What are your thoughts on investing in a cash flow rental that you can hold for a bit in lieu of buying in an area that is great for living now, but may not be what you need in 3-5?
Still chuckling over Jason’s question, which of course I can’t answer. It’s funny though because we all have mental pictures of radio personalities or people on the phone and then when we meet them we have to adjust that. I always thought my lawyer would look like Raymond Burr and even though I finally met him and he looks nothing like that I still picture Raymond Burr every time I talk to him.
So…I’m in agreement that it’s the under 500K crowd that is motivated by the tax credit primarily – totally gut feel. I think there are some buyers above 500K that perhaps accelerated their plans a bit but were not pushed over the edge.
And government intervention in any market is a really bad idea. The market is stronger than any government. All the government can do is cause temporary dislocations and waste tax dollars.
I think the tax credit is a good idea, if only to spread the pain out a little more evenly between existing homeowners and new buyers. Sure its propping up prices and delaying the inevitable. But people need relief in this economic shytstorm.
MDJ,
The funny thing about me renting is that I called the bubble way too early – 1999/2000. It wasn’t even a bubble then. I might have even been better off buying back then but I wouldn’t have had the flexibility I needed at the time.
The tough part about your question is that only you can figure out the balance between housing as an investment and housing as a place to live. If the cash flow was only slightly positive and you really didn’t like the place then I’d say it’s not worth it – and vice versa. If you are banking on appreciation to help out on the investment end don’t assume any more than 3.7% per year – Chicago’s historic average.
Ditto on the buying next winter idea. There’s a better than 50/50 chance ill be seriously looking next November and December
Gary,
Damn.
“And government intervention in any market is a really bad idea. The market is stronger than any government. All the government can do is cause temporary dislocations and waste tax dollars.”
Yell yes. I wish govt would stop doing this. For example, they sue Goldman Sachs, basically for being smart and making money, now criminally investigate them. Now the market is tanking. Thanks guys. That was really helpful. PURE POLITICALLY THEATRE. I hope they win.
And on TOP of that they are so distracted by BS, they basically ignored the oil spill in the gulf. They should have been all over that from the start.
Sorry, venting… Back to Real Estate.
“they sue Goldman Sachs, basically for being smart and making money, now criminally investigate them.”
No, they sued and criminally investigated GS for violating basic securities laws about disclosure. People/firms get investigated for stuff like that *allthetime* even if they don’t make big money.
Is this one partly political? Of course, but it’s not something that gets trotted out *only* for theater purposes.
Of course, the Senate hearings are a total farce.
Agree that the market is too powerful. People still think RE is going to go right back to where it was and will pay accordingly. We now have two generations of people in this country that have been brainwashed into thinking that RE investing by way of home ownership is the key to getting rich.
Who is funding these FHA loans? Where is the money coming from? Is it mostly large banks like BOA/Countrywide? Are the mortgages being converted into CMO’s again?
I want to massively short into these bagholders and change my name to Chicagobear.
“Who is funding these FHA loans?”
You and me? It’s all ending up with fannie/freddie.
The combination of the “shitty deal” email with the heavy marketing of their ticking-time-bomb fund seems like textbook securities fraud. One could always make the argument about “political timing”. But a crime is a crime, and clear evidence needs to be investigated (and if necessary prosecuted).
The SEC completely blew it on Madoff, despite however many years of whistleblowing by Harry Markopolos. If they want to inspire confidence in the market, then there needs to be consequences for fraud.
I received my home buyer tax credit in my checking out today. It was awesome.
Didja see the article in the Chrib today about Coldwell Banker? “The company’s agents are asking their sellers to offer a credit at closing of 3 percent of the purchase price, or up to $8,000, to buyers who sign a purchase contract between May 1 and July 31.”
http://www.chicagotribune.com/classified/realestate/ct-home-0430-local-scene-coldwell-event-20100429,0,7848999.column
Question,
Yeah, I had heard that this was coming. What a totally stupid idea. Sounds an awful lot like a price reduction to me.
“Who is funding these FHA loans? Where is the money coming from?”
Banks are funding them. But the only reason banks are funding them is Dept of HUD is backstopping the loans.
“I want to massively short into these bagholders and change my name to Chicagobear.”
The government has already “nationalized” Fannie & Freddie and banks aren’t doing stupid lending anymore that they are on the hook for. You could always short US treasuries I suppose. Better bet would be to short munis of fiscally troubled states (ie: California, Illinois).
“Meanwhile, Freddie Mac on Friday said that the number of mortgages that were 90 days or more past due fell to 4.13% in March from 4.2% in February, the first monthly decline in three years.”
http://online.wsj.com/article/SB10001424052748704093204575216530213580458.html?mod=WSJ_hps_LEFTWhatsNews
Is that light at the end of the tunnel?…or an oncoming train?
The unfettered market is what created these stupid loans in the first place.
anon, question for you on RE taxes if you get a chance to check your email.
The unfettered market did not create these loans.
What created these loans was the implicit guarantee by the government. We created a massive moral hazard with the S&L and LTC bailouts, The Long Term Capital bailout in the 90s told the financial institutions; go take all the risks you want, don’t worry about the consequences, because you will get bailed out. It was always known that, if things got out of control, that relief would be arranged. Which it was. Even had Glass Steagal not been repealed, we would have had a tower of bad debt on our hands, but the repeal of Glass Steagal was really the icing on the cake because it made it possible to build the towers of derivative debt based on the original debt, which was way bad enough.
It was like handing your manic kid with ADD an Amex card with an unlimited line of credit, and telling him to do whatever he wanted to do, you would pay the bill if he got too carried away.
Jason and Gary, your ignorance is distressing.
Do you even realize that the only reason you are allowed and technically able to spout your drivel is because of “government intervention”?
The funny thing about people like you is that when faced with the facts most of your ideas and beliefs are shown to be completely wrong. The problem is that nobody ever calls you out and makes you defend your idiocy.
Jason (TFO) on April 30th, 2010 at 10:25 am
Gary,
Damn.
“And government intervention in any market is a really bad idea. The market is stronger than any government. All the government can do is cause temporary dislocations and waste tax dollars.”
Yell yes. I wish govt would stop doing this. For example, they sue Goldman Sachs, basically for being smart and making money, now criminally investigate them. Now the market is tanking. Thanks guys. That was really helpful. PURE POLITICALLY THEATRE. I hope they win.
And on TOP of that they are so distracted by BS, they basically ignored the oil spill in the gulf. They should have been all over that from the start.
Sorry, venting… Back to Real Estate.
Happy May Day!
As many of you know, the Haymarket riots that took place in Chicago (West Loop for you real estate types) was the inspiration behind the International Workers Day (May 1).
Hi
Does anyone know if 550 st clair still has units for sale from the developer? any thoughts on the building ?
Jerry,
Please provide the facts that show us wrong. I believe your reference above is to the DARPA initiative that created the Internet. That was not a market intervention. That was a technology initiative. Sometimes the government supports technology that makes sense and sometimes they just piss away money. Supporting the use of ethanol as a fuel (a market and technology initiative) for instance is a total waste.
BTW, I posted the data on contracts by day for the last 2 months compared to last year to show the impact of the homebuyer tax credit:
http://www.chicagonow.com/blogs/chicago-real-estate-getting-real/2010/05/home-buyers-rushed-to-buy-as-tax-credit-expired.html
Gary 1, Jerry 0
Now that the credit has expired I actually think the world is going to end. Or it is flat. Not sure which, but I also caught by cat barking.
So far the RE bears have been right so you’re thinking seems to be on the right track, JMM, even if a little extreme.
I always love those who try to paint a rose-colored picture given recent history and trends definitely aren’t on their side.
Some are going to call the bottom and get it right. Very few are going to be right the first time doing so. Even fewer will actually make money via going long at the right time.