Dear Sue,
Do you think that the expiration of the federal tax credit has caused the 25-percent decline in home sales?
The National Association of Realtors reported that the sales in July were 25.5 percent lower than a year ago, and 27.2 percent lower than June.
According to NAR, the sales volume hasn’t been that low in 15 years.
I have read that some analysts expected a sales drop of between 8 to 15 percent because of the expiration of the federal tax credit.
No one expected a 25-percent drop.
Do you think that the cessation of the federal tax credit is the only reason that sales are off so much?
~ Curious Carrie
Dear Carrie,
The statistics from the National Association of Realtors represent the entire country.
Since real estate markets are local, I took a look at Placer County’s sales statistics and found that sales were in fact down 23.6 percent from last month and 12 percent from last year.
I believe that pending sales are the most representative of what is going on in the market today.
The pendings will become the sales statistics 30, 60 or 90 days from now.
I was very pleased to see that the pending sales matched my experience. Pendings are up 30.5 percent over the last month, 17.3 percent over the last year and 37.5 percent over the last 15 months.
Placer County appears to be stable. Today’s pending sales will become tomorrow’s closed sales.
Now, back to your question. I believe that many factors have contributed to the decline in the July sales volume.
Markets are typically made up of many types of buyers, including first-time buyers, investor buyers, move-up buyers, move-down buyers and buyers who’ve had job transfers.
In recent years first-timers and investors have primarily fueled the real estate market. The move-up buyers and buyers that are transferred by their employers have been few and far between.
Just think about it. How many first-time buyers can one squeeze into a single market?
Can first-time buyers and investors alone support a market?
The current market is lacking in move-up buyers because the proceeds from the distressed property sales are going directly into the lenders’ coffers.
The money for move-up buyers has essentially been taken out of circulation.
It’s also possible that the rental market is nearing a saturation point.
I have noticed that rents are softening slightly and the vacancy rate is somewhat higher.
Unemployment, especially in the Sacramento region, has had an adverse impact on employee transfers.
The expiration of the federal tax credit has contributed to the decline in sales, however as you can see there are other factors.
Keeping people in their homes by putting them to work and absorbing the distressed properties that are currently in our inventory along with low interest rates and government incentives will help to stabilize our market.
Sue Thompson is owner and sales manager of HomeTown Realtors in Auburn. She can be reached at seesue@seehometown.com, or on the web at homedollarsandsense.com.
