Home Sales
Home sales nationwide grew in February, according to the National Association of Realtors®, but home prices continue to decline in most areas of the country. Industry experts see this as an indication that it might take several more years for the real estate sector to recover fully.
The Pending Home Sales Index, a forward-looking indicator, rose 2.1 percent to 90.8, based on contracts signed in February, from 88.9 in January. The index is 8.2 percent below 98.9 recorded in February 2010. The data reflects contracts and not closings, which normally occur with a lag time of one or two months.
“Month-to-month movements can be instructive, but in this uneven recovery it’s important to look at the longer term performance,” said Lawrence Yun, NAR chief economist, who stressed the importance of looking at the broader trend. “Pending home sales have trended up very nicely since bottoming out last June, even with periodic monthly declines. Contract activity is now 20 percent above the low point immediately following expiration of the home buyer tax credit.”
According to Illinois Association of Realtors® data, statewide home sales, including single-family homes and condos, in February 2011 totaled 5,575 homes sold, up 1.3 percent from 5,505 sales in January 2011—and down 10.0 percent from February 2010. The median price in Illinois in February was $128,800, down 4.6 percent from $135,000 for the same month last year. The statewide single-family median price reached $129,000, up 1.6 percent from $127,000 in February 2010 and up 2.8 percent from $125,500 in February 2009.
While home sales are showing signs of recovery, data released March 29 by Standard & Poor’s, tracking home prices through January 2011, shows that home prices continue to drop in most areas of the country. The only metro areas in the United States that showed improvement in prices since last January were San Diego and Washington, D.C. San Diego’s figures rose just 0.1 percent over price averages seen in January 2010, but average prices rose more than 3.6 percent in Washington D.C.
Industry observers point to the unemployment rate, which remains about 10 percent nationally, as one reason for the reluctance of people to buy condos and other real estate, despite the low prices. In cities such as Washington, D.C., where the government accounts for many jobs, home sales have not been affected by unemployment as much as other areas.
Extension of homebuyer tax credit
An extension of the homebuyer tax credit is assured, now that both the Senate and House of Representatives have passed the measure. President Barack Obama is expected to sign the new homebuyer tax credit bill on Friday, Nov. 6.
The Senate's 98-0 unanimous approval of the measure on Nov. 4, followed by passage in the House on Thursday by a 403-12 vote the following day, is an indication of how popular the program is. It is attached to a bill that will also give 20 weeks of extra unemployment insurance to people who have been jobless since last year.
Only first-time homebuyers were eligible to benefit from the original tax credit, which was first offered as part of the Housing and Economic Recovery Act of 2008. At that time, a $7,500 first-time home buyer tax credit was available for those who purchased a home between April 8, 2008, and July 1, 2009. Then, under Obama's American Recovery and Reinvestment Act of 2009, Congress raised the credit to $8,000 and extended the deadline to Nov. 30.
The extension of the homebuyer tax credit, as stated in House Bill 3548, makes the program available to many current homeowners as well as first-time home buyers. First-time buyers (or anyone who hasn't owned a home in the past three years) would still be able to get the $8,000 credit, and current qualified homeowners could get a tax credit of up to $6,500. The lesser amount would be available to homebuyers who have been in their current residence for a consecutive five-year period in the past eight years. To qualify for the tax credit, participants must meet certain income limits and would have to sign a purchase agreement by April 30, 2010, and close by June 30.
Under the new bill, intended to help spur activity in the slumping real estate market in Chicago and elsewhere, qualifying income levels have been raised to $125,000 for single taxpayers and $250,000 for joint taxpayers, from the current $75,000 and $150,000.
The maximum purchase price allowed for any house or condo would be $800,000, and only for principal residences, so vacation homes would not qualify.
According to the National Association of Realtors, which has been lobbying for an extension , as many as 400,000 resale transactions (out of 1.2 million homes sold through the program) were completed specifically because of the first-time home buyer tax credit, thereby helping to clear up the glut of available properties. Supporters believe the benefits of extending and expanding the tax credit will outweigh the cost, which could amount to as much as $10.8 billion in lost taxes.
According to U.S. Treasury statistics released in October, about $8.5 billion in refunds have already been claimed for new and resale homes. Provisions to curb fraud were added to the extension of the homebuyer tax credit after the Internal Revenue Service identified 167 suspected criminal schemes and began examining more than 100,000 potential civil violations of the program.
