Real Estate Values Post Federal Tax Credit
Real Estate Values Post Federal Tax Credit
Real Estate Values Post Federal Tax Credit may go way down. As we near the end of the period when buyers can realistically take advantage of the $8,000 Federal Tax Credit for first time home buyers, what will happen to real estate values?
Home Market Values May Drop by $8,000.
Will the value of entry level homes drop by $8,000 when the home buyer tax credit expires? One could make a case for the value of entry level homes being dropped by some significant percentage fo the $8,000 Federal Tax Credit because the net cost to buyers will be increased with the loss of the tax credit.
Home Values Not Changed by Federal Tax Credit Expiration
Will home values stay essentially the same when the federal tax credit expires? Here the argument assumes no change in the overall market value of a home based on a change in Federal Tax policy. I would argue that this is unrealistic.
1. The demand for entry level / first time buyer homes will drop dramatically after the Federal tax credit expires. Pretty much anyone with aspirations of owning a home in the next 12 months has made a move this fall so as to take advantage of the Federal Tax Credit. We have “poached” demand for the next 3 to 6 months by dangling an $8,000 tax credit in front of consumers. The car business experienced a severe slump when cash for clunkers expired.
2. The incentive for home buyers to “make a decision now” will be gone. Buyers will sit on the sidelines until some significant change in the economy takes away the uncertainty of buying a home in a depressed economic climate. Too many potential home buyers are concerned about the security of their job, concerned about potential inflation and concerned about the massive deficits our government has run up.
BE A CONTRARIAN AND BUY A HOME AFTER THE TAX CREDIT EXPIRES
Qualified buyers in the market for a home after November 30 will OWN the marketplace. Buyers can negotiate like the number 1 draft pick in the NFL. Everything will be on the negotiation table for buyers. INVESTORS can sweep in and scoop up homes and foreclosures in the first time buyer market at prices we have not seen in a decade. In my humble opinion, it will be a great time to buy a home. Being a contrarian has been the one investment strategy that has paid out in the long run. As Daddy Warbucks says “buy low and sell high”.
SELLERS WILL NEED TO BE REALISTIC ABOUT REAL ESTATE VALUES
Sellers who overprice their homes in the post Nov 30th market will find themselves on the sideline. It is more important than ever for sellers to stage their property and have all the curb appeal items at 100%. Homes that have been prepped for the marketplace and priced realistically will continue to sell. Marginal properties will grow whiskers as they sit on the sidelines with no showing activity.
