Well, just when I thought it was not possible, Shaun Donovan, Secretary of Housing and Urban Development, said that the housing market’s July woes were “worse than expected” and that the administration may support a new homebuyer tax credit.
In an interview on CNN, Donovan said the administration is “concerned” about the direction the housing market has taken. He defended the Obama administration’s record on supporting the housing market, despite new signs that the market is still in a downward spiral. Donovan did not rule out a further homebuyer tax credit to support the market. Congress passed a homebuyer tax credit to support first-time buyers. The credit has now expired.
While the statistics show that the housing market was recovering late last year and into early spring, once the current tax credits expired in April, the market went back to its downward trend. I based that on the data put out by the National Association of REALTORS® (see below) showing a marked decrease in sales and a corresponding increase in home on the market.
What I find interesting about the data is that the November 2009 tax credit had a greater impact than the April 2010 tax credit. I suspect if the government does a third round of credits that the impact will be less than the earlier two credits. I’m also waiting to see August’s data as one month does not make a trend.
While the Federal Tax Credits may have stalled the free-fall of the housing market, I’m not convinced that they brought that many new buyers into the market or that the sales of entry-level homes resulted in an increase in sales of move-up homes as many of the buyers cashing in on the tax credit purchased foreclosures and short sales.
Further, many people who would like to purchase a home cannot do so because of the extremely tightened mortgage underwriting guidelines so until we loosen those standards just a little I don’t expect to see a rash of new homebuyers coming into the market.
It will be interesting to see which position the administration and NAR takes on this issue.
