Last weekend I distributed my latest e-Newsletter (No more tax credits). I suggested that the recently expired tax credits had significant effect on new residential sale contracts in Austin and Central Texas over the past year:
- After last year's first-time homebuyer tax credit program ended November 30, 2009, home sales (i.e., closings) were down 33% in the next three months (December 2009 through February 2010).
- In three month period March through May 2010, during which all closed sales were eligible for the extended and expanded tax credit, sales increased 65% over the previous three months.
It is difficult to distinguish home purchases that were motivated mostly or entirely by the availability of a tax incentive from purchases that would have happened anyway. Spring is a time when we would expect to see some seasonal market acceleration anyway. Since properties contracted by the end of April and closed through June are eligible for this year's tax credit, it is too early to know how many buyers will actually qualify. There is an empirical indicator of whether the pace of new contracts dropped after April 30 and it can be seen in currently pending contracts.
With that in mind, I reviewed 2,940 pending listings in the Austin Metro area as of close of business June 7, 2010. Here's what I found:
Note that this is purely a snapshot of the pending contracts now -- not a tally of total contracts executed during these months. It is interesting, though, that 56% of the contracts in pending status today were signed after the expiration of the tax credit eligibility period. Moreover, there were 22% more contracts were signed in the month after the tax credit program than in the month that should have been most impacted by the tax incentive.
So ... the early indication is that Summer will be just fine for sellers and buyers of residential real estate. Can things change? Sure. Will other markets look different? Probably. Nonetheless, I am encouraged to see the Austin/Central Texas market maintain momentum after tax credits expired, and I look forward to getting "back to normal" in the coming months and years.