December Drop in Home Sales

Crying Wolf About April 30?

Sales of existing homes in December fell 16.7 percent from November to a seasonally adjusted annual rate of 5.45 million units, the National Association of Realtors said Monday.

--"Existing Home Sales Drop More Than Forecast"; The New York Times (1/25/2010)

My take is that a big chunk of the drop is explained by the (then) Nov. 30 deadline for qualifying for the first-time home buyer tax credit.

As you may recall, at the 11th hour, Congress extended and expanded the credit.

The new expiration date is April 30 (deals actually have another 60 days to close).

And no, I don't expect a flurry of transactions ahead of the new deadline -- at least not more than would normally occur in what is otherwise a seasonally very busy time for the housing market (at least in Minnesota).

$6,500 Tax Credit & The Move-Up Market

$6,500 Tax Credit

Move-Up Market

Entry-Level Market


Helping the Move-up Market

The $8,000 tax credit for first-time home Buyers worked so well that the government has extended it to move-up Buyers, too (albeit in slightly less generous form).

Beginning Dec. 1, eligible Buyers who've occupied their existing home for 5 out of the last 8 years qualify for a $6,500 tax credit of their own.

The idea is to leverage strength in the lower rungs of the housing market to help more expensive housing.

If tax incentives actually buoy the move-up market, guess which homes, in which market segment, are likely to be targeted next?

Hint: it takes jumbo mortgages to buy them.