Results are in and the federal government's First Time Homebuyer Tax Credit, recently extended to cover contracts signed up until the 30th of last month, was a success. The credit was created in March of last year as part of the American Recovery and Reinvestment Act in an attempt to boost home sales by providing an incentive to sell and give first time buyers a break when purchasing a home in the current economy. It was extended in November based on its early successes as part of the Worker, Homeownership and Business Act of 2009.
Arguably one of the most effective pieces of the recovery act, the tax credit gives first time homebuyers up to an $8,000 break off the purchase of their new home, or 10% of homes valued at up to $800,000. Any taxpayer who had either never owned a home before or who had resided at the same residence for five consecutive years was eligible.
The results of the tax credit are tangible. Home prices jumped 6.8% for the month of March, with a seasonally adjusted annual rate of 5.35 million units of existing property sold, compared to the same rate in February of 5.01 million. Experts had predicted the March figures to come in at 5.29 million units. Compared to the year before, sales were up 16.1%, a truly significant increase. These findings mark the ninth straight month where sales were higher than that month the year before.
While winter storms hurt the home sales figures on a month-by-month basis, the unseasonably warm weather in March of this year caused buyers to go out and bargain-hunt for homes, experts say. Many agree that the First Time Homebuyer Tax Credit was an important incentive to close on purchases of existing homes, especially since the credit was expanded to cover higher income brackets and those who had previously owned a home. By extending the credit to sales contracts signed by April 30th and closing on or before June 30th, the government has extended the spring market.
What was surprisingly absent from this program's extension, however, was the "mad dash" of last-minute sales expected at the end of April. Instead, it seemed that these purchases had already taken place with enough time to qualify the homebuyers for the tax credit. Many realtors noted the increase in business, even if there wasn't an additional rush surrounding the tax credit's deadline. Most buyers were aware of the government program's deadline and were therefore working hard to get their homes under P&S by April 30th. Some real estate offices even reported sales being twice the amount of those for April of last year.
Not all potential buyers found a suitable house in time however, many choosing to forego the opportunity of a tax break in order to wait for a house which was more suitable. The average price of homes was also up for March 2010 compared to a year ago. The median price for sold property is now at $170,000, a 0.4% increase from March 2009, though distressed properties did comprise 35% of homes on the market during the month. Housing inventory was up overall as well by 1.5% with 3.58 million homes for sale. These homes represent an 8-month supply, compared to an 8.5-month supply for February 2010, which also indicates an improving market.
The largest increase in home sales was in the Midwest, which saw a 7.2% jump in the total amount of property for sale, bringing March's annual pace to 1.19 million homes. These figures represent a 15.5% increase in sales from the same month last year. Single-family home sales saw a 7.3% increase, bringing the adjusted annual rate for March to 4.68 million homes, a 13.3% increase from 12 months before.
Finally, it is worth noting that the tax credit is not over for some. Members of the military, foreign services and intelligence community who qualify for the tax incentive have been given a few exceptions to the guidelines based on the fact that duty often requires them to move frequently. Selling a home purchased with the tax credit within three years would typically disqualify someone from the program, but active members of these communities will not be subject to this, and they will receive an additional year to employ the tax credit, including sales through June 30, 2011.
