The impending end of the Federal Government’s tax credit for first time homebuyers has created a stir of activity amongst the mainstream Hawaiian media. Surely, the end of this government intervention will have consequences as well as will provide us with a better picture of the market as a whole. Yet, varying opinions have been portrayed through Hawaii’s principle news sources, such as The Honolulu Star Bulletin, and The Honolulu Advertiser. The Star Bulletin outlined differing opinions from Prudential Locations’ CEO Bill Chee, as well as John Riggins of John Riggins Real Estate.
Chief Executive Officer Bill Chee of Prudential Locations LLC expects a slowdown before the upcoming summer season ignites activity again.
But John Riggins of John Riggins Real Estate said he’s not as optimistic since the number of shadow listings — default notices, auction properties and lender-owned properties — is exceeding properties on the Multiple Listing Service.
“Just like the Cash for Clunkers got people buying automobiles, the tax credit got people buying homes,” Riggins said. “What remains to be seen is what happens after (the) April 30 (deadline), and we’ll know that next month.”
Similarly, the Advertiser stated its thoughts and observations on the housing market’s performance thus far, as well as what the termination of the tax credit may mean for buyers and sellers alike in the coming months.
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Perhaps a bigger question that will soon be answered is to what extent the federal tax credits have pumped up the market.
The stimulus program was intended to shore up U.S. housing markets by providing qualifying first-time homebuyers up to an $8,000 rebate on the purchase of a home. The incentive, which began at the beginning of last year, initially was set to expire in December.
Federal officials extended and expanded the program this year to continue the $8,000 credit for first-time homebuyers and add a credit up to $6,500 for qualifying repeat buyers. Under the program, purchase contracts must be signed by April 30 and close by June 30.
Some market observers question how much impact the tax credit program is having, and suggest that sales won’t fall significantly after the program ends. But economists say such stimulus programs can have the effect of advancing sales that would have occurred later had there been no stimulus, and expect a drop of activity after the stimulus is gone.
Regardless of which stance you take on the uncertainty of life after the tax credit, it is certain that its repeal will reveal the vibrancy and depth of the market’s comeback with much greater clarity. As noted, many analysts and skeptics have predicted time and again that without the first time credit, the market would have continued to slide. Advocates of the rebound point to strong numbers across the board, including a rise in median home prices, as well as market velocity. Perhaps the sole certainty we can expect this coming summer, is the rise in the once rock bottom mortgage rates. As depicted in The Advertiser’s Thursday article, we may have begun to enter a period which is marked by rising, rather than falling rates.
The average rate on a 30-year loan has jumped from about 5 percent to more than 5.3 percent in just the past week. As mortgages get more expensive, more would-be homeowners are priced out of the market — a threat to the fragile recovery in the housing market.
And if you wanted to refinance at a super-low rate, you may have missed your chance. Mortgages under 4 percent are still available, but only for loans that reset in five or seven years, probably to higher rates.
Rates are going up because of the improving economy and the end of a government push to make mortgages cheaper.
Without regard to bias, there is a consensus among the real estate community that times are changing. As the economy continues to recover and the federal intervention era concludes, many buyers on Oahu feel their time to buy their dream home must be now. Homeowners and sellers once again have a return on their investment in their sites. The Oahu real estate society has truly found itself at a momentous crossroads.
