Recent months cast cloud over post-tax-credit housing market outlook

Home sales around the nation dropped 17 percent in December – with existing homes showing the largest monthly drop in 40 years – but that’s nothing compared to what happened in the Treasure Valley.

The number of homes sold in Ada and Canyon counties fell 31.6 percent (from 832 to 569) between November and December 2009, according to numbers from the Intermountain MLS.

New home sales in the area fared worse than existing home sales did, dropping 33.3 percent in Canyon County and a whopping 59.3 percent (falling from 140 to 57) in Ada County.

Ronda Conger, VP of marketing for Boise-based CBH Homes, said the drop was expected for two reasons. First, December isn’t typically a strong month for home sales, with the holidays taking priority over home buying.

And second, the first-time homebuyer tax credit’s extension took away the urgency previously felt. Where the former deadline for purchasing a home and qualifying for the $8,000 tax credit was Nov. 30, Congress in early November extended that deadline through the end of June (though sales documents have to be signed by April).

“Buyers took a big breath and realized it’s not that much of a hurry anymore,” Conger said. “They’re thinking, ‘We can take our time, enjoy our holidays – there’s lots of time to get to April.’”

But what about after April?

One national economist told the Associated Press the report of December’s numbers “places a large question mark over whether the recovery can be sustained when the extended tax credit expires.”

And that seems to be everyone’s concern.

Some economists, such as Jaret Seiberg of Concept Capital in Washington D.C., are even predicting yet another extension of the tax credit.

Last month, Seiberg told the Wall Street Journal Congress could extend the credit through Nov. 30 or phase it out over six to 12 months.

“We believe a phase-out is most likely because it would benefit housing markets but let Democrats argue they are fiscally responsible because they have designed an exit strategy that weans consumers off the subsidy,” he said.

Optimists say job recovery will pick up where the tax credit leaves off.

“The headwind we face is rising mortgage interest rates,” said economist Lawrence Yun of the National Association of Realtors, “but the compensating factors will be the home buyers tax credit in the first half of the year and increased job creation in the second half.”

For so many reasons, let’s hope those jobs materialize.

**IBR Real Estate