RISMEDIA, September 10, 2009—(MCT)—A gauge of future U.S. home sales rose more than expected in July 2009 to the highest level in more than two years as first-time buyers rushed to take advantage of a tax credit that expires this fall. The National Association of Realtors recently said its seasonally adjusted index of sales contracts signed in July for previously occupied homes rose 3.2% to 97.6. It was the sixth straight increase, and 12% higher than the same month last year. The index of pending home sales could indicate how sales completed this month and next will turn out.
But using pending home sales to determine the future of the market isn’t necessarily accurate, said Darrel Gomez, a real-estate agent with Keller Williams Realty in Rancho Cucamonga. “Pending sales really should not count. It’s about closing,” Gomez said. “The pending homes, some of them, they fall out of escrow.” In many cases, buyers may have multiple offers pending, he said. Not all contracts lead to a close in escrow and having multiple offers on the table means a buyer will likely need to back out of an offer. “I have a lot of buyers in escrow. I tell them don’t count your blessings until I hand you keys,” Gomez said.
The Inland Empire is the second largest foreclosure market in the nation, which boosted the number of homes available for sale, Gomez said. Gomez has also seen many buyers make offers that are well above the asking price. “I have seen homes in Rancho Cucamonga that people made offers on actually go for $80,000 more because of the desirability of the home and location,” Gomez said.
Dave Coy, president of Century 21 Lois Lauer Realty in Redlands, said the market has leveled off as far as pending home sales in the Redlands area. “As an example, we had 598 in May, 621 in June and 620 in July, we pretty much hit a plateau,” Coy said. “A lot of that is really based upon the fact that we don’t have a lot of inventory of available homes.” Aside from the foreclosures and default properties, there are fewer homes on the market. “We have a very small traditional market, and that’s really just because a lot of people don’t want to sell in this market for good reason,” Coy said.
A 12% jump in sales contracts in the West and a 3% increase in the South drove July’s overall increase. Low home prices combined with the Nov. 30 expiration date of the $8,000 tax credit for first-time home buyers contribute to a spur in sales. “The great home prices right now is why they should be motivated to buy,” Gomez said. “The $8,000 is just the icing on the cake.”
For first-time home buyers to cash in on the deal, they must close escrow on a property by the deadline, Coy said. “If you’re not in escrow by Sept. 30, a first-time home buyer might run the risk of not taking advantage of that $8,000,” Coy said.
The NAR projects that about 2 million first-time buyers will take advantage of the credit this year and says it is spurring 350,000 additional sales that wouldn’t have happened otherwise.
Analysts predict sales will drop off when the tax credit expires, or if mortgage rates rise from near-record lows. Foreclosures also continue to rise, and banks are forced to sell those properties at deep discounts, pushing prices down.
Many real-estate professional are urging the federal government to extend the first-time home buyer tax incentive. Coy said there are even efforts to increase the credit to $15,000 and make it available to all home buyers.
Copyright (c) 2009, Inland Valley Daily Bulletin, Calif.
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