Home Buyer Tax Credit Program Expiration Weakens Pending Home Sales
- Jul 06, 2010
Washington, D.C.–It happened just as industry experts predicted. The June 30 closing deadline for first-time homebuyers to take advantage of the Worker, Homeownership, and Business Assistance Act of 2009–or the homebuyer tax credit program–forced a decline in pending home sales after having bolstered them for three consecutive months, as per the National Association of Realtors. But a late-breaking development could turn the tide.
The June 30 expiration of the tax credit deadline–which had originally been scheduled for November 30, 2009–applied to contracts written by April 30, and, according to NAR, it is conceivable that as many as 180,000 homebuyers who signed contracts by that date may have missed the June 30 closing. However, the consumers are not necessarily at fault here. NAR contends that many closings have been delayed due to the onslaught of buyers, slow processing of short sales, and a more extensive loan underwriting process.
The statistics illustrate the impact. In May, NAR’s Pending Home Sales Index declined 30 percent from April. “Consumers are rational and they rushed to meet the tax credit eligibility deadline in April,” NAR chief economist Lawrence Yun, said in a prepared statement. “The sharp decline in contract signings in May is a natural result.”
More of the same had been forecasted for the months of July and August, but that changed when the U.S. Congress passed a bill extending the program after hours on Wednesday, June 30. The legislation pushes back the closing deadline for buyers with contracts dated no later than April 30 to September 30. Only time will tell how the new September 30 tax credit deadline will effect pending home sales.