The residential housing market, which for more than a year has been propped up by a federal tax credit program for first-time and repeat buyers, is about to find out whether it's healthy enough to stand on its own.
Buyers hoping to receive the tax credits have until midnight tonight to put a house under contract and until June 30 to close. The looming deadline is causing for a hectic week for some Triangle brokers and their clients.
"We're talking harried, rush, rush, rush, got to get this contract done," said Ross Rhudy, general manager of Ammons Pittman GMAC Real Estate in Raleigh, which has about 50 agents. "I had an agent at my door 30 minutes ago telling me they're hustling to get this contract done by tomorrow."
Among those who beat the deadline was Leon Barber, 68, who put a home under contract Saturday in the Quail Hollow neighborhood in North Raleigh.
Barber, who hasn't owned a home since he moved to the Triangle several years ago from Washington is eligible for the first-time credit that allows buyers to reduce their federal income taxes by 10 percent of the price of a home, up to a maximum of $8,000.
Barber said he began looking seriously a month ago because he felt the housing market had stabilized. He likely would have bought a home without the credit, but it spurred him to act sooner.
"It probably made me get off the pot," Barber said.
Triangle real estate professionals will be watching closely to see what effect the disappearance of the tax credits will have on area home sales and sales of homes around the country. A significant percentage of Triangle home buyers relocate from elsewhere and need to be able to sell their existing homes.
The tax credit program was credited with helping the Triangle housing market bottom out last fall, which led to widespread relief when Congress voted in November to expand and extend it for another four months.
This time around, the fear of a severe drop off in sales is less widespread.
"You have to believe that we're pulling some demand forward," said Mark Vitner, senior economist for Wells Fargo in Charlotte.
Vitner said the fact that the tax credits are expiring in the middle of the peak home-buying season is making it harder to gauge the effect they are having now.
Home sales in the Triangle were up 6 percent in the first quarter when compared with the same period in 2009, Triangle Multiple Listing Services data show. Pending sales were up 21 percent.
Jill Flink, a Prudential York Simpson Underwood broker in Raleigh, said she expects that the next few months of sales data will show an increase in activity as people rush to qualify for the tax credits.
"I don't know that they are going to be dramatic, but there will be the last minute rush," she said.
Mari Trosclair, a broker with Piedmont Preferred Realty in Durham, said four of her clients have put houses under contract in the past six weeks - the busiest period she has had since the housing market began its decline.
But Trosclair said the economy - not the tax credit - appeared to be the impetus to act.
"Business has increased and at higher price points," she said. "People are feeling comfortable spending a little bit more money."
Although the tax credits have been hailed by the real estate industry, critics of the program have said it is artificially inflating demand at the expense of the taxpayer.
Last year, more than 700,000 taxpayers took advantage of the first-time homebuyers tax credit program, according to the U.S. Treasury Department. Overall, about 1.8 million taxpayers have received $12.6 billion in tax credits to buy a home.
Vitner said this is the first of many tests the economy will face as it gets weaned off the stimulus measures that have been adopted over the last 18 months.
"Sooner or later, the economy has to stand on its own two feet," he said. "We can't continue to run these enormous budget deficits."
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