Tax-credit deadline boosts existing-home sales

Buoyed by buyers racing to beat the deadline for the second and last federal tax credit, existing-home sales nationally rose 22.8 percent in April from the same month in 2009.

The National Association of Realtors reported Monday that sales rose 7.6 percent in April from March.

The median sales price was $173,400 in April, up 4.5 percent from the same month a year ago, the association reported.

As reported last week by Prudential Fox & Roach HomExpert, existing sales in the eight-county Philadelphia region rose 32.5 percent from April 2009. Median prices were up 2.9 percent, to $208,000.

Now that the tax credit is gone - agreements of sale had to be signed by April 30 and must close by June 30 to get the credit - economists are finding it difficult to chart the future of the housing market.

There is "no doubt there will be some temporary fallback in the months immediately after it [the credit] expires," said association chief economist Lawrence Yun.

"The government incentives to buy homes worked, but who knows where we go from here," said Joel L. Naroff, an economist in Holland, Bucks County.

Naroff said the report "doesn't really tell us what condition the housing market is in" because the government, by virtue of the credits, interfered with the market.

"We should expect that sales will fall fairly sharply over the next couple of months and only after that adjustment will we get any decent picture of the market," he said.

Many brokers and agents concur with the economists that the May market is much slower than April.

"Appointments to show our listings are down 44 percent from March and April," said Art Herling, regional vice president of Long & Foster Real Estate. "This stat is a forecaster of sales to come."

IHS Global Insight economist Patrick Newport said home sales had been riding "a two-hill roller coaster because of the two tax credits."

"After a midyear plunge, our view is that sales will start growing sustainably as the job market improves," he said.

April sales were higher than predictions because the models that economists use have been affected by government intervention.

"It will take awhile before the craziness created by the federal policy is washed out of the data," Naroff said. Once that occurs, the second half of the year is likely to see improved conditions helped along by continued low interest rates.

With that said, economists generally agreed that the second round of credits did not generate the high volume of sales of the first - even though the extension included qualified buyers in the "trade-up" market.

The end of the tax credit moved a lot of homeowners to list their houses for sale, boosting inventory to an 8.4-month supply, or 4.04 million units, from 8.1 months in March.

That was still 540,000 units less than the July 2008 inventory peak.

The best piece of news may be that prices are increasing across the land, according to Newport.

"Rising house prices will reduce the number of homes that will fall into foreclosure," he said.