The Race to Sell Before the Credit Expires: 2970 N. Lake Shore Drive in Lakeview
If you’re looking to buy right now, you might have seen quite a few bonuses being thrown your way to get under contract before the tax credit expires on April 30 (remember you must be under contract by the 30th but have until the end of June to actually close on the property.)
This 2-bedroom unit at 2970 N. Lake Shore Drive in Lakeview has one of those incentives.
The listing says the seller will pay $3,000 to the buyer towards closing costs if under contract by April 30.
The unit has hardwood floors as well as a dining room.
The kitchen has white appliances. There is no central air (wall units only) nor washer/dryer in the unit.
There appears to be assigned parking with the unit, however.
While the building is on the lake, the listing isn’t clear whether the unit has lake views. The listing says it has “awesome seasonal views of the park.”
What will happen to the entry-level market once the tax credit expires at the end of the month?
Mary Harrington at Coldwell Banker has the listing. See the pictures here.
Unit #6A: 2 bedrooms, 2 baths, no square footage listed
- Sold in May 1992 for $109,000
- Sold in May 1997 for $127,000
- Originally listed in March 2009
- Currently listed for $269,800
- Assessments of $608 a month (includes heat, doorman, cable)
- Taxes of $2541
- No central air- there are wall units
- No in-unit washer/dryer
- Parking included
- Bedroom #1: 18×12
- Bedroom #2: 13×13
- Living room: 16×14
- Kitchen: 10×8
- Dining room: 16×10
Once the tax credit expires, prices will drop by more than $8000, especially for the properties that aren’t best in class, and those that are older, like this one.
Yes, the credit is inflating prices, which is why it’s not being allowed to expire. I hear it has now been extended through August, but I’m not sure if that’s a sure thing yet.
More foreclosures will be hitting the market than ever, due to record 2009 NODs. BofA will ramp up foreclosures steeply this year to get the bad loans off their books so it will be interesting to see what happens to prices this summer.
yeah, might as well wait to put an offer in until late Summer on any properties that are currently for sale. I don’t know if the credit will be extended – I had heard Congress wasn’t that interested in it. Why do we need it at all? Let the markets run their course and the recovery will begin sooner!
“Yes, the credit is inflating prices, which is why it’s not being allowed to expire. I hear it has now been extended through August, but I’m not sure if that’s a sure thing yet.”
It has NOT been extended. Word, so far, out of Congress is that the same Congressman who pushed to get the first credit extended is not pushing to extend this one. So far, the consensus is that this credit will not be extended. But that can all change.
There was record foreclosure data for February/March out this morning.
Laura – it’s not just the credit, it’s the credit combined with 3.5% FHA financing. Example: a $356k townhome is worth $356k only if the first time home buyer can finance $349,500 of the purchase price. At at $356k its a ‘steal’ – this same unit sold for $55k less than the 2005 price of $411k (which was also financed at 95%).
I’d wager that upwards of 40% of all contracts signed between the beginning of the year and 4/30 will be very similar.
Look out below when the credit expires. Why would any first time home buyer sign a contract on 5/1 or later whereas if they sign by 4/30 they get $8,000 in free government cheese?
http://www.redfin.com/IL/Chicago/3809-N-Milwaukee-Ave-60641/unit-D/home/12776615
“Laura Louzader on April 12th, 2010 at 5:27 am
Yes, the credit is inflating prices, which is why it’s not being allowed to expire. I hear it has now been extended through August, but I’m not sure if that’s a sure thing yet. “
I looked for a place about a month or so ago and all the realtards insisted I sign a contract before the tax credit expires. I explained to them that I will adjust my price accordingly after the tax credit expires, so the burden is on them to sell, not on me to buy because I will take $12k off the price on May 1. I just re-upped my lease because with 10% unemployment, an unknown (but probably giant) quantity of shadow inventory, interest rates creeping up and the tax credit expiring, there will be plenty of knives to catch in the coming year. Factor in the coming property tax hikes to take care of the city unions and I might be enticed to buy if the market comes down another 25% or so. At this point, the only thing that can reverse the downward trend is if the Fed’s printing press can push inflation up to 10% to spook people into buying hard assets.
I’m glad the homebuyer tax credit is going away. Its just giving away money to people who were going to buy a house anyway. There was a NAR survey that said that only a small % of people bought due to the credit, so it was costing anywhere from 43-100k per person…
http://www.calculatedriskblog.com/2010/03/very-expensive-home-buyer-tax-credit.html
Let’s see… they’ll give me $3000 off if I sign by April 30, and I’ll get $8000+ off if I sign May 1st or later. This is a really hard decision…
Even if you think you can make up the $8,000 tax credit by a reduction in the purchase price once it expires, you have no idea where interest rates will be in 6 months. If you can lock in a great rate, I for one believe it is not entirely smart to hold off buying.
No one is going to buy anything if the interest rates reach the sky reglardless of price cuts and tax credits.
Foreclosures will re-stabalize the market and the banks will trickle those out throughout the next 2 years…and believe me, they will only be discounted 10-20% under “current” market value. Perks will be parking, no back assesments/taxes/spec assesments, etc…
People still bought homes during the 70’s and 80’s when interest rates were high. There was this little thing called land sales contracts to get around the high interest rates.
But no worries, interest rates won’t be going ‘sky high’ for years. The fed says it sees interest rates staying low for a long time. Do you want to be the one to bet against the fed?
Foreclosures are not stabilizing because they’re still reaching record highs.
That shadow inventory is huge, estimates range between 3-5 years volume at current sales levels. that means if the market was nothing but foreclosed homes it would take between 3-5 years to sell them all. That doesn’t include non-distressed existing home sales or new home sales. It’s a fricken disaster out there. The internet is filled with stories of people living without making a single mortgage payment for 2 or 3 years. They will hit the market, eventually, there are too manhy properties to trickle them out for 2 or 3 years.
“A-Fed on April 12th, 2010 at 9:52 am
No one is going to buy anything if the interest rates reach the sky reglardless of price cuts and tax credits.
Foreclosures will re-stabalize the market and the banks will trickle those out throughout the next 2 years…and believe me, they will only be discounted 10-20% under “current” market value. Perks will be parking, no back assesments/taxes/spec assesments, etc…”
“That shadow inventory is huge, estimates range between 3-5 years volume at current sales levels.”
Source, please?
When interest rates go up, home prices fall.
There is only so much the Federal Reserve can do to keep interest rates low. That said – I don’t think we will see a spike in interest rates in the next 12 months.
I also believe that waiting for the tax credit to “expire” is a good thing. With the FHA allowing it to be monetized, a lot of people are getting their down payment for free. If that goes away prices will drop.
Hardly any lenders are allowing the tax credit to be monetized for the down payment. There are some instances where municipalities are giving an advance loan on it, but generally, very very few buyers are getting their tax credit monetized to buy a home. You either have the 3.5% down on your own without the credit or you don’t.
It is a really big assumption that prices are going to drop in lock step with the expiration of the tax credit.
http://www.dsnews.com/articles/sp-estimates-three-year-overhang-of-shadow-inventory-2010-02-16
S&P says three years as a conservative estimate; others sources say up to 5 years.
Russ, prices won’t fall ‘lockstep’ the day after the credit expires, but, first time home buys will slow dramatically and price declines from there will be necessary to stimulate demand.
The NAR estimates that at least 350,000 of the 1.8 million first-time purchased a home solely because of this tax credit
My guess is that first time home buying slows by 20%, and since first time buyers are about 50% of all purchases (recently)
I’m going to go with 10% less demand overall.
“There was a NAR survey that said that only a small % of people bought due to the credit, so it was costing anywhere from 43-100k per person…”
“The NAR estimates that at least 350,000 of the 1.8 million first-time purchased a home solely because of this tax credit”
20 is not a “small” percent. And would indicate a MAX cost per marginal buyer of ~$40k, not a possible range up to $100k.
But that’s what you get when you use the NAR as a source for data.
You forgot all the people who were committing fraud about this tax credit anon (which was a lot) lol
“You forgot all the people who were committing fraud about this tax credit”
true, that.
Speaking of fraud, somebody floated this scenario to me the other day.
Say a young unmarried couple is living together. The home was purchased by the man before settling in with the little lady. If he were to “sell” the home to the girlfriend would she be able to claim the $8,000 tax credit? I realize there is a lot of risk involved in giving up ownership of a home for $8,000, but that aside, would this be legal? Would any ethical RE agents or mortgage providers actually agree to do this?
RE: Your hypothetical seems to be a fairly straightforward transfer of ownership, assuming the original note holder wasn’t part of the second mortgage. Though I’m not a lawyer and haven’t read the rules around the tax credit as I’m not going to be claiming it.
Say a young unmarried couple is living together. The home was purchased by the man before settling in with the little lady. If he were to “sell” the home to the girlfriend would she be able to claim the $8,000 tax credit? I realize there is a lot of risk involved in giving up ownership of a home for $8,000, but that aside, would this be legal? Would any ethical RE agents or mortgage providers actually agree to do this?
This is a sell/buy situation. Parties are not legally related, so it meets guidelines. Girlfriend gets the $8,000. No need for a real estate agent for this transaction. Bank will give loan, if girlfriend meets guidelines. I would calculate the net after costs such as new mortgage, etc. before going forward, as closing costs can be quite high.
Wow, I didn’t really think that would be legal, but sounds like it might be. That is a good point though about the closing costs eating a lot of the “profit” though. In a normal buy situation those costs were going to be incurred anyway. But in this scenario, they are just added transactional costs.