The State of the Market and What Really Matters

Hi and hope everyone is having a great summer. Wow, it is surely flying by in true tradition!

The market continues to show signs of recovery. The National Association of Home Builders has formally asked Congress to extend and enhance the first-time home buyer?s credit, which is due to expire on December 31, 2009. Here I go again speaking about this credit, but it is critical that these first time buyers gain entry into the market. I cannot stress enough the importance of this for the housing recovery.

The NAHB is specifically asking that the home buyer tax credit be extended for a year and that it be opened up to include all home buyers. This means that the income limit for eligibility, which is currently $150K per household, would be wiped away, allowing everyone to participate. If we are lucky, this could end up somewhere in between.

If Congress acts to extend the tax program, it would spur 383,000 additional home sales and create over 350,000 jobs.

The other issue that has been plaguing the housing market is a faulty appraisal system. The use of short sales and foreclosed properties as comps for determining home values has and continues to hurt home values and has even killed some home sales. When appraisals come in below the contracted sales price, there are often buyers who either pull out of the deal or ask that the seller reduce the price that they previously agreed upon. Most banks require that the comps used are from sales that are within the past 2-3 months, which is also key to the creation of stress in this area. This is a very short period of time. Previously the banks were allowing appraisers to go back 6 months to comp properties.

Hopefully we will have some movement on these issues over the next couple of months.

(c) 2009 Fran Lichtman