With just over a week left to qualify for the federal tax credits being offered to first-time and repeat home buyers, it's time to start contemplating what becomes of the Triangle housing market once those stimulus programs disappear.
Back in November, when the first-time buyer credit was initially supposed to expire, there was widespread concern that sales would drop precipitously without the government's crutch.
This time the fear isn't as palpable, largely because the tax credits' ability to lure buyers off the sidelines appears to have waned.
"I've had a really tough time trying to quantify how much of the first-quarter activity was related to this," said Stacey Anfindsen, a Cary appraiser who analyzes Multiple Listing Services data for the Triangle. "I kind of thought they had pumped the well dry last year."
Home sales in the Triangle were up 6 percent in the first quarter when compared to the same period in 2009, Triangle MLS data show. Pending sales were up 21 percent, a jump that looks less impressive when one considers that the first half of 2009 was the darkest period for sales in the Triangle.
A residential real-estate rebound will be vital to the Triangle's overall economic recovery, as the industry directly or indirectly supports a long list of businesses, including construction companies, retailers and landscapers.
The federal tax credits allow eligible first-time buyers to reduce their federal income taxes by 10 percent of the price of a home, up to a maximum of $8,000. Repeat buyers who have lived in their houses at least five years are eligible also for a tax credit of as much as $6,500.
The deadlines for both tax credits are April 30 to put a home under contract and June 30 to close.
It was hoped that the repeat-buyer tax credit would give a much-needed boost to sales of homes priced at $400,000 and above, where sales have been particularly soft.
But many repeat buyers either don't qualify for the $6,500 or are unwilling to put a house under contract until they are able to sell their current home.
John Wood, a Re/Max United agent in Cary, said that the Triangle, while much healthier than most other markets, needs those other markets to continue to improve.
"We still rely on that relocating buyer for a percentage of our market," he said.
Interest rate effects
Wood expects to see a dip in sales among homes priced at $250,000 and below - the sweet spot for first-time buyers - after the tax credits go away. But he said the threat of rising interest rates could draw more buyers into the market during the next 90 days.
"There's clearly uncomfortableness with where rates are going," he said.
Of course, predicting when interest rates will rise in today's economic environment is nearly impossible, and even if rates rise a point in the coming months, they would still be at historically low levels.
The national average for a 30-year fixed-rate mortgage was 5.33 percent in March.
Jobs matter most
The biggest factor in the housing market's ongoing recovery is likely to be the creation of jobs, which will increase people's overall confidence in the economy.
Although the Triangle's unemployment rate stood at 8.9 percent in February, there are some signs that people are gaining confidence.
The number of resale homes on the market in the first quarter was 18 percent higher than the same period the prior year. Many of these sellers are akin to the job seeker who gave up looking for work for a spell because they gave up hope.
"I think you're seeing the people who didn't have the confidence to sell for the last two years, but maybe they wanted to or needed to, now they're tentatively seeing what's out there," said Steve Schlageter, local division president for Pulte Homes.
New-home listings
The increase in resale listings has coincided with a drop in the number of new homes for sale. New-home listings declined 25 percent in the first quarter compared to the same period the year before as builders stopped most speculative construction.
The lack of new-home inventory should help the resale market. But Anfindsen said the biggest problem facing the Triangle market today is that the number of homes coming on the market is far outpacing the number of homes being sold.
"You just have too many resales coming on the market," he said.
