Sue Fox, @Properties. Direct 773.816.1788
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Over the weekend, one of my buyers asked me whether I thought the government’s $8,ooo tax credit would really expire on November 30 as scheduled. There’s been talk of extending it, and even a few proposals in Congress to do so, but here we are at the end of August with only three months to go!
For would-be homebuyers, this is no small question. It can take 30 to 60 days to close on a home, meaning that if you plan to squeak in under the deadline, you need to find a home and get it under contract sometime in the next five weeks.
Some buyers may gamble that Congress will extend the program. But look what happened with “Cash for Clunkers,” the government cash incentive to get people to trade in their old gas-guzzling cars for a rebate of up to $4,500. The money ran out this weekend, despite the program’s popularity.
Sen. Johnny Isakson, a Georgia Republican, has introduced a bill that would dramatically expand the home-buying credit, boosting it to $15,000 and opening it to everyone purchasing a home, not just first-time buyers. There would also be no income limits. Sen. Chris Dodd, a Connecticut Democrat who chairs the Senate Banking Committee, is co-sponsoring the bill.
Meanwhile, the housing industry is pushing hard for some sort of extension, pointing out that home sales have begun to recover nationwide as first-time buyers snapped up the government’s $8,000 giveaways. The National Association of Realtors and the National Association of Home Builders are both mounting lobbying campaigns to extend the credit, and perhaps expand it, through 2010.
Congress, of course, has bigger fish to fry at the moment, including health care reform. But I would say chances are fair that at some point, the housing credit will be given a new lease on life. After all, housing is to blame for much of our economic malaise, so why kill a program that is actually boosting home sales?
Home sales and prices are on the rebound both nationally and locally, thanks to a wave of buyers taking advantage of low interest rates, attractive prices and the $8,000 tax credit for first-time buyers.
In the city of Chicago, prices in July inched up 1.1% over the previous month, continuing a positive trend. The median price in the city now stands at $245,000, according to a report today from the Chicago Association of Realtors.
Buyers, it seems, are finally jumping off the fence. Part of the allure, of course, is that home prices citywide are down 18.3% over last year, making this summer’s pricing look like a bargain.
“Chicago continues to show a leveling of the marketplace as we see distressed properties being absorbed,” said David Hanna, president of the Chicago Association of Realtors.
Some economic analysts are beginning to call a bottom. In an upbeat speech today to central bankers and economists, Federal Reserve Chairman Ben S. Bernancke asserted that “the prospects for a return to growth in the near term appear good.”
The stock market jumped more than 150 points, buoyed by Bernancke’s optimism and a better-than-expected report on the national housing market. According to the National Association of Realtors, existing home sales jumped 7.2% from June to July, the largest monthly gain since the group began tracking these sales a decade ago. Even more encouraging, sales were 5% higher than in July 2008.
“The housing market has decisively turned for the better,” said Lawrence Yun, the group’s chief economist.
Has the housing market finally hit a bottom? Only time will tell, but several recent signs point to a small but significant upturn in both prices and sales.
Nationally, home sales in 20 metro areas posted their first month-to-month increase in almost three years, according to the S&P/Case-Schiller Home Price Index. In Chicago, that spelled a 1.1% rise in prices from April to May 2009, the most recent month for which data is available. (As mentioned in my previous posts, however, the overall picture is much less rosy. Prices are down 17.5% in Chicago since May of last year, according to Case-Schiller. In other words, it’s still very much a buyer’s market.)
New home sales are also showing signs of traction. Yesterday the government reported that single-family home sales shot up 11% in June — well over the 3% increase economists were expecting. It was the largest monthly jump in almost eight years. And last week, resales of existing homes also rose, for the third month in a row.
Economists are sounding notes of caution, calling the uptick a modest recovery at best and pointing out that much of the activity appears to be at the lower end of the market, where first-time buyers are taking advantage of discounted prices, low interest rates and the $8,000 tax credit.
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