And the $8,000 first-time homebuyer credit goes off into the sunset. With April 30th come and gone, if you don’t have a property under contract, you’re out of luck on receiving the credit. Technically, the credit continues until June 30th, but properties need to be under contract NOW. Many in the real estate industry seem to be despairing over the expiration, but for investors and homebuyers alike, this is a day to celebrate.
For the investor, it quickly became obvious that market-rate and REO sellers had cut back on their price-drops in recent months as they held out hopes for getting top-dollar on sales. Now, I want to see appreciation as much as the next guy, but the reality is that we are in a buyers market and will continue to be in a buyers market for years to come. Now that the credit is gone, it will be nice to have the market dictate the prices again. No longer will investors or those that didn’t qualify for a tax credit have to compete against the subsidies of those that do. I expect to see some pretty significant price drops in the single-families and duplexes that were not bought up during the tax-credit frenzy. Especially as the inventory starts to increase again over the summer.
For owner-occupants, things don’t look glum either. Although most qualified buyers took the tax credit simply because it was there, most buyers didn’t need it to buy a home. Knowing that you were getting $8,000 from the feds, sellers have been holding back on price drops and aggressive negotiations with the hope that they could get more for their house. Now that there are less people aggressively seeking a new home since one of the big incentives has been removed, I would expect sellers to start getting motivated about unloading properties. Any rehabber that is sitting on a completed project or homeowner that is serious about wanting to move is going to have to come back to reality. You might not be able to get the $8,000 tax-credit anymore, but there is a good chance you can still save $8,000 on the sale price of that house.
Now that the government has its nose out of the real estate market, there are going to be growing pains for sure. But this cloud has a silver lining if you keep at your property search. The market is going to rebound in due time, but in the meanwhile the buying is still going to be good.