If the recent increase in home sales can be attributed to the first time homebuyer tax credit, what will happen when the tax credit expires? The Seattle Times article “U.S. monthly homes sales surge, but can it last?” discusses the increased home sales and what it means for the housing market. Home sales are up 36 percent from the low point last January, and seem to be rising still. The extension of the tax credit is part of the reason for this increase but I believe low mortgage rates and home prices are also contributing. The amount of home resales nationwide rose 10.1 percent from September to October, the biggest monthly increase in a decade. With increases of this magnitude it is hard to believe that it is solely first time homebuyers creating this surge in home sales. In King County new and existing home sales increased by 10.8 percent, and as seen in my last post many of these sales were in the luxury home market. The extended tax credit is due to expire April 30th 2010 and there will most likely be another surge in home sales as buyers rush to take advantage of the credit before it is gone for good. The real question is what will happen after the surge? If the source of improved home sales is attributed only to the tax credit then it is likely that sales will drop again after the incentive expires. However, based on the amount of increase and the areas of increase not in Seattle it seems as though first time home buyers are not the only ones spurring the housing market into recovery. This means that when the tax credit expires nothing will have changed for buyers who did not qualify to begin with, and they will continue to take advantage of the low mortgage rates and home prices. Although home sales may decrease some when the tax credit expires, the market should stay relatively stable, and will most likely continue to work its way back to where it was a few years ago. Click the picture below to read the article which prompted this post.
