Home sales jumped in October ** Median prices continued to drop as most of the deals involved first-time buyers seeking the $8,000 tax credit.
Morning Call, The (Allentown,
PA) - Saturday, November 14, 2009
Author: Spencer Soper
OF THE MORNING CALL
Lehigh Valley home sales took a big jump in October as
first-time home buyers took advantage of an $8,000 tax
credit, but median home prices continued to drop.
There were 544 homes sold in October in Lehigh and Northampton counties, up 19.6 percent from the same month a year ago, according to a monthly report by Prudential Patt, White Real Estate. The median price was $172,700, down 6.4 percent from a year ago and down 2.4 percent from September's median price.
The report indicates first-time home buyers continue to be lured into the market by a tax credit worth up to $8,000, which is boosting sales activity and clearing an abundant inventory of homes for sale. Since those sales tend to be in the lower price ranges, that brings median prices down.
The tax credit was scheduled to expire at the end of this month, which has helped prompt a flurry of sales in recent months. But President Barack Obama signed a bill last week that extends and expands the tax credit. Now, buyers who have owned their current homes for at least five years are eligible for tax credits of up to $6,500. First-time home buyers, defined as anyone who hasn't owned a home in the last three years, still get up to $8,000. To qualify, buyers have to sign a purchase agreement by April 30 and close by June 30.
"The key ingredient is the expansion for move-up buyers," said Brad Patt, senior vice president of Prudential Patt, White. "The idea is to bring new buyers to the market, but also see if existing owners will make a trade up or down to take advantage of today's good prices."
The Valley's housing market has been searching for the bottom under the pressure of rising joblessness and foreclosures, lower consumer confidence and tighter lending standards. Despite falling prices, local real estate professionals say they are encouraged by rising sales volumes that have helped to reduce the inventory of homes for sale.
The rising sales and falling prices are consistent with national housing trends. Nationally, home sales jumped 9.4 percent in September, the latest month for which data are available from the National Association of Realtors. And the national median sale price for an existing home dropped 8.5 percent to $174,900 in September. The association on Nov. 23 is scheduled to release national home sale date for October.
One reason the first-time home buyer tax credit has only sparked sales at the lower price ranges of the market is because many people are buying foreclosures, said Loren Keim , president of Century 21 Keim Realtors in Allentown.
There were 230 homes in some stage of the foreclosure process in October in Lehigh and Northampton counties, up nearly sixfold from the same month a year ago, according to RealtyTrac, which monitors foreclosures nationally.
If a first-time home buyer purchases an occupied home, the sellers usually move to another home, creating a domino effect in the housing market that stimulates more activity. But when a first-time buyer purchases a foreclosed home, usually at a discount from an occupied home, it doesn't generate any further sales.
"The higher volume of foreclosures … kept the trickle-up effect from happening," Keim said.
Ryan Sweet, an economist with MoodysEconomy.com, said the Lehigh Valley housing market will be slow to recover, even with the tax credit, because unemployment continues to rise and home prices continue to fall.
"Expanding the tax credit to increase the number of people who can take advantage is positive, but its impact may be muted by the fact that home values have been falling," Sweet said. "So people may be reluctant to sell their current home to upgrade."
He expects Lehigh Valley prices to continue to fall until mid-2010, at which time the labor market will also begin to stabilize. The Valley's unemployment rate hit a 26-year-high of 9.5 percent in September.
"A double-digit unemployment rate in the Lehigh Valley seems unavoidable," he said. "This may encourage some people to wait until they are more comfortable with their jobs and incomes before buying a home."
spencer.soper@mcall.com
There were 544 homes sold in October in Lehigh and Northampton counties, up 19.6 percent from the same month a year ago, according to a monthly report by Prudential Patt, White Real Estate. The median price was $172,700, down 6.4 percent from a year ago and down 2.4 percent from September's median price.
The report indicates first-time home buyers continue to be lured into the market by a tax credit worth up to $8,000, which is boosting sales activity and clearing an abundant inventory of homes for sale. Since those sales tend to be in the lower price ranges, that brings median prices down.
The tax credit was scheduled to expire at the end of this month, which has helped prompt a flurry of sales in recent months. But President Barack Obama signed a bill last week that extends and expands the tax credit. Now, buyers who have owned their current homes for at least five years are eligible for tax credits of up to $6,500. First-time home buyers, defined as anyone who hasn't owned a home in the last three years, still get up to $8,000. To qualify, buyers have to sign a purchase agreement by April 30 and close by June 30.
"The key ingredient is the expansion for move-up buyers," said Brad Patt, senior vice president of Prudential Patt, White. "The idea is to bring new buyers to the market, but also see if existing owners will make a trade up or down to take advantage of today's good prices."
The Valley's housing market has been searching for the bottom under the pressure of rising joblessness and foreclosures, lower consumer confidence and tighter lending standards. Despite falling prices, local real estate professionals say they are encouraged by rising sales volumes that have helped to reduce the inventory of homes for sale.
The rising sales and falling prices are consistent with national housing trends. Nationally, home sales jumped 9.4 percent in September, the latest month for which data are available from the National Association of Realtors. And the national median sale price for an existing home dropped 8.5 percent to $174,900 in September. The association on Nov. 23 is scheduled to release national home sale date for October.
One reason the first-time home buyer tax credit has only sparked sales at the lower price ranges of the market is because many people are buying foreclosures, said Loren Keim , president of Century 21 Keim Realtors in Allentown.
There were 230 homes in some stage of the foreclosure process in October in Lehigh and Northampton counties, up nearly sixfold from the same month a year ago, according to RealtyTrac, which monitors foreclosures nationally.
If a first-time home buyer purchases an occupied home, the sellers usually move to another home, creating a domino effect in the housing market that stimulates more activity. But when a first-time buyer purchases a foreclosed home, usually at a discount from an occupied home, it doesn't generate any further sales.
"The higher volume of foreclosures … kept the trickle-up effect from happening," Keim said.
Ryan Sweet, an economist with MoodysEconomy.com, said the Lehigh Valley housing market will be slow to recover, even with the tax credit, because unemployment continues to rise and home prices continue to fall.
"Expanding the tax credit to increase the number of people who can take advantage is positive, but its impact may be muted by the fact that home values have been falling," Sweet said. "So people may be reluctant to sell their current home to upgrade."
He expects Lehigh Valley prices to continue to fall until mid-2010, at which time the labor market will also begin to stabilize. The Valley's unemployment rate hit a 26-year-high of 9.5 percent in September.
"A double-digit unemployment rate in the Lehigh Valley seems unavoidable," he said. "This may encourage some people to wait until they are more comfortable with their jobs and incomes before buying a home."
spencer.soper@mcall.com
