The spring buying season was a little longer than usual this year. Home sales gathered strength as the summer progressed. Pending home sales, for example, jumped 3.2% in July from the previous month (the sixth-straight monthly increase) and rose 12% from July 2008.
The $8,000 first-time homebuyer credit, which is due to expire after Nov. 30, is likely driving sales and could continue to do so into the fall. Sales typically slow before schools open in the fall. But there’s nothing like a fast-approaching deadline to motivate (Think tax day). A buyer must close on a house by the end of November to take advantage of the program. Many last-minute shoppers are likely to be rushing, during the coming weeks, to sign purchase contracts.
And sellers also will be eager to make deals before the credit ends. Data released today by real estate site Trulia suggests that, in many lower-cost cities, the share of listings with at least one price reduction increased steadily from June through August. In Omaha, for example, 23% of homes on the market had at least one price cut. By August, 27% of listing prices were cut. Kansas City, Colorado Springs, Atlanta, Indianapolis, Memphis, Milwaukee, and Raleigh also showed a similar pattern.
What I’m wondering is whether sales will continue to rise as the Nov. 30 deadline approaches and then drop like a stone. Or does the housing market have enough momentum to recover on its own? (I argued in last week’s issue of BusinessWeek that the housing market is stronger than many believe). Congress also could act to extend or even expand the credit. Johnny Isakson, a Republican Senator from Georgia and a former real estate broker, is behind a plan for a $15,000 tax credit that would be offered to any buyer, not just a first-time buyer. Isakson’s bill would make the credit available for another year.