By Kevin Chiu
First time home buyers are being credited $12.5 billion in government tax credits, according to the Treasury Department. But the federal tax credit with the expansion of the program to move-up home buyers is losing momentum, a Housing Predictor analysis shows.
A boom to first time home buyers and real estate agents amid the highest volume of foreclosures on record, the tax credit was expanded by the federal government in November to include move-up home buyers. But only a small percentage of move-up buyers have been able to take advantage of the $8,000 credit. The majority have had trouble selling their current homes.
A survey of 50 housing markets monitored by Housing Predictor indicates that the heavy volume of purchases triggered by the tax credit has slowed. The credit boosted home sales last summer and during the last part of 2009 only to fizzle, lacking the ability to sustain a real recovery in the majority of housing markets surveyed. Only eight markets of the 50 surveyed demonstrated on-going strengthening with more home sales. The tax credit expires April 30th.
High unemployment in the majority of the country is still hampering any real sort of recovery in housing. Despite low interest rates, which may rise later in 2010, home sales dropped in January and February. Home prices showed signs of stabilizing from government programs in some areas of the country, but the pent up back-log of foreclosures listed for sale and a shadow inventory of properties are pressuring home values in most markets.
The Obama administration has pumped more than $1.4-trillion into the housing market from buying mortgages with tax credits and programs to refinance homes at lower rates, but still hasn’t made a major move to remedy ailing markets. “You’ve got a really big problem that requires big guns and the tax credit is just not big enough,” said Robertson Williams of the Tax Policy Center in Washington, D.C.
Mortgage holders who owe more on their home than it is worth in today’s market are another problem. Under water home owners are helping to eliminate any real recovery in the housing market as more choose to walk away from their homes rather than keep paying the mortgage. Most homeowners have to sell their home before they can move and without equity they are at a loss to do so.
The National Association of Realtors lobbied for and got the tax credit extension from Congress, who asked them not to come back to request an extension for the program again.
A bill to force lenders to modify mortgages for homeowners at risk of foreclosure is bogged down in Congress as an average of 8,600 foreclosures a day are recorded across the nation.