Starting May 1, the day after the Federal Tax Credit expired, numerous news outlets were already reporting doom and gloom projections from industry analysts. It's true that with the end of the credit, real estate industry watchers are anticipating that sales will slow.
There are some positive factors however that shouldn't be ignored. Many industry watchers also agree that the Tax Credit did what was intended, reduce inventory, and sell homes.
Lawrence Yun, chief economist of the National Association of Realtors (NAR), agreed, "The tax credit has been very effective in drawing down excess inventory, with about one million additional sales resulting directly from the stimulus."
Housing inventory is an important barometer and is defined by the number of properties for sale at any given time. A month of supply is the number of months it would take to sell the inventory. On average, to sell a home in four to six months represents a normal level of inventory. To see the level of inventory in Wellesley, view the included graph. Typically, with higher levels of inventory, it remains a buyer's market.
Some regions of the country are currently experiencing a lack of inventory. When this occurs, home prices tend to stabilize and/or rise. NAR recently reported in the release Home Prices Rising in More Metro Areas, First Quarter Sales Up From a Year Ago that in the first quarter of 2010, 91 out of 152 metropolitan statistical areas showed higher median existing single-family home prices in comparison with the first quarter of 2009, including 29 with double-digit increases.
This could be a result of lower inventory levels, but it could also signify that consumer confidence is finally rebounding. According to Bloomberg.com in an article posted on May 3, consumer spending rose by the most in 6 months and incomes climbed for the first time this year.
When consumers feel comfortable with their financial position, they feel more comfortable making those major life changing purchases.
NAR President Vicki Cox Golder, said in the same release that there's been a change in market psychology. "Buyer confidence is back, and home buyers have long-term views. The typical buyer plans to stay in their home for 10 years, so we've put the flipping mentality behind us and most people see housing for what it is - shelter that provides social benefits and is also a good long-term investment."
The reality is this current environment has made homes much more affordable as sellers price their properties appropriately. To determine the buying trends in your area, ask the Coldwell Banker residential sales professional's at Team Lynch.
