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June 1st, 2010 6:59 AM by David W. Welch
How does the old nursery rhyme go? "April tax credits bring May closings." All the experts have been expressing their concerns that real estate sales will fall off now that the tax credit has expired. For once I do not have any statistics only my own experiences with buyers. I have been quite busy with first time home buyers, repeat home buyers and investors. First, investors do not qualify for any credit, but they probably account for almost half of our market here in Orlando. I am making that estimate based upon the percentage of cash sales. In fact, just over 50% of our closed sales this year have been cash transactions. Many of the repeat buyers I have been working with did not even know they qualified for a tax credit until I told them.
The first time home buyers definitely had more interest in the tax credit, but eveyone I have worked with has said that was not the key reason they were buying now. I am still working with first time buyers who started looking during the credit and are still actively looking for a home. In the weeks since the deadline has past, I have continued to receive calls and e-mails from buyers looking to purchase their first home. Probably the biggest swing we will see between April and May will be in the number of contracts written. There were around 4,700 contracts written in April that are either still pending or have closed. In May there are only about 3,600, but I don't see that as some big crash about to happen. In March there were about 3,700 contracts written that have either already closed or are still pending. My guess is that many of those extra 1,100 contract will not close at all. Many buyers rushed into contracts on short sales as a safety net in case they could not get another home under contract in time for the tax credit.
It will be difficult to quantify the actual impact of the tax credits, but I think they had some limited impact here in Orlando. Lower prices and record low interest rates play a far greater role in the recovery of our sales. So far this year sales have been very strong with around 1,800 closed in January, 2,000 in February, 2,700 in both March and April. So far there have been about 2,300 posted sales for May. Friday was the last day to close in May, so I expect we will see a few hundred more posted over the next few days. June is looking very good for me with five closings scheduled right now, and another one coming. These six sales are evenly split between buyers and sellers. They are also evenly split between investors, first time buyers and repeat buyers. Only one is bank owned, two are short sales and three are "normal" sales, so they are also evenly split between distressed and not distressed. Only two qualify for the tax credit.
David Welch Real Estate Optimist, Orlando Real Estate