The “No More Tax Credit” Blues

This week our listings saw an average of 1.9 showings each.   Traffic has slowed significantly since the expiration of the tax credit on April 30th and the perceived motivation of buyers has declined along with it.

The statistics for the Charlotte area housing market show major signs of improvement, but I’m concerned that the numbers don’t paint an accurate picture of what’s ahead.   Last week we published our monthly E-Newsletter with the Charlotte Market Stats.   All of the indicators point to a strong market recovery.   Unfortunately, the numbers don’t  help to predict how the market might change now that the home buyer tax credits are no longer available.   Here is a summary of the stats for Mecklenburg county  when comparing  April 2010 to the same period last year:

Home sales are up 52%

Average sales price is up 18%

Average time on market is down 1%

Pending home sales are up 45%

Supply is up 6%

Mortgage rates have risen about a 1/4 point.

On the surface, these numbers look fabulous for the local market.   However, they reflect the activity of buyers during a time when significant tax breaks were available.   Next month, we will likely see a comparable increase in home sales since the contracts written before April 30 will be closing in May and June.   But that will change.

The most important statistic to watch right now is pending home sales which is the most current indicator of contract activity.   As it stands, pending home sales are already down 4% from last week alone.   This means that new contract activity is slowing as the  current contracts close.

I have no doubt  that we will see a slowdown and  market correction take place over the next few months.   But hopefully it will be short lived.   The world economy is fragile right now.   Fears of financial instability in Europe have triggered major selling on Wall Street in recent weeks.   I have seen mixed commentaries around the long term outlook.

I am beginning to notice a pattern of sellers that are becoming more bullish about the value of their home given the recent increase in home sales data.   Be warned that is a dangerous place to be.   The housing market is still in recovery and given the fragility of the economy, a bull head for sellers of real estate could lead to a long fruitless road on market.   Buyers  are  looking for  deals and so the aggressively priced sellers are still the only ones making sales.

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