Are The Home Buyer Tax Credits Failing? Existing Home Sales Fall In February

Last Updated Mar 23, 2010 12:22 PM EDT

Are the home buyer tax credits failing?

That's what's being whispered behind closed doors as the National Association of Realtors (NAR) looks at faltering existing home sales in February.

According to the Realtors, existing home sales fell slightly overall in February. Sales rose slightly in the Northeast and Midwest, and declined in the South and West.

Overall, sales of single-family homes, townhomes, condominiums and co-ops slipped 0.6 percent to a seasonally-adjusted annualized rate of 5.02 million.

The good news? That's still 7 percent higher than February, 2009, when the entire financial world seemed to be in freefall.

The bad news? It's down from January's seasonally-adjusted annualized rate of 5.05 million sales.

Ever the optimist, Lawrence Yun, NAR's chief economist, said February's dramatic weather may be masking underlying demand.

In the NAR's press release, he noted, "Some closings were simply postponed by winter storms, but buyers couldn't get out to look at homes in some areas and that should negatively impact near-term contract activity."

In other words, snowstorms might have kept folks from seeing homes they'd then want to buy. Which would make sense except it was the South and West that had slower home sales and while Miami did have atrocious weather in February (Brrrrr!), it was hardly enough to keep people from making offers.

Oh, well. Slower sales meant that the inventory of homes for sale jumped up again, to a high not seen since last August. It would take 8.6 months at the current rate of sales to sell all of the homes on the market.

What's normal? Agents like to see a 3 or 4-month inventory of homes for sale.

And of the homes that are selling, 40 percent are distressed sales, meaning foreclosures or short sales often bought by investors. (Buyers and sellers need so much information on foreclosures that Baird & Warner, a large independent real estate brokerage firm in Chicago, put a link to foreclosure sales on its home page.)

The bigger question is will the home buyer tax credits actually get people to buy a home before they expire on June 30?

The February numbers don't seem to be showing the kind of momentum you'd want to see. Certainly, the home builders aren't seeing any kind of a spike in sales. New home sales numbers are expected out this week, but the January numbers showed new home sales at the lowest point ever (since records have been kept). And since there aren't that many newly-constructed homes just waiting for buyers to move into, new home sales in March may not reflect any bump up due to the tax credits.

What about existing home sales? If you're going to buy a home and take advantage of either the $8,000 or $6,500 home buyer tax credit, you'll need to have a valid contract by April 30 and close by June 30. That's only five weeks from now.

According to NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz., home buyers typically spend months looking at more than a dozen properties before making an offer.

That doesn't leave much time.

Are you seeing more activity due to the home buyer tax credit? Can you tell if that's the reason or are your buyers just feeling better in general about the economy?

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Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and the upcoming Buy, Close, Move In!. She blogs about money and real estate at ThinkGlink.com.
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    Ilyce R. Glink is an award-winning, nationally-syndicated columnist, best-selling book author and founder of Best Money Moves, an employee benefit program that helps reduce financial stress. She also owns ThinkGlink.com, where readers can find real estate and personal finance resources.