Westchester County Home News: How to deal with a recovery

Thursday, October 8, 2009

How to deal with a recovery

How to deal with a recovery

The vast majority of our nation’s economists, when polled by The Wall Street Journal and other financial news media, agree that we have moved out of the worst recession since the Great Depression.¹ They do not necessarily agree, however, that we have moved into a sustainable recovery. With so many possible issues still capable of creating major setbacks, many analysts are taking an approach to the present economy that is characterized by caution and uncertainty. In this tenuous economic environment, what are the important events to watch and how best should we deal with them? How, in short, can we best serve our homebuyers in such an uncertain time?

1. Most immediately, make sure that our homebuyers are fully aware of the opportunity implicit in the federal program offering first-time buyers a tax credit of up to $8,000.²

Many who could save a large amount of money aren’t aware that they can qualify for the program. If they have ever owned their own principle residence, they may think themselves unqualified—not realizing that “first-time buyer,” for the purposes of this program, means someone who hasn’t owned his or her personal residence at any time during the three years preceding a current home purchase.

Crucial Expiration

Equally important, make sure that those who might qualify for this tax benefit are aware that it expires soon. The purchase of the personal residence qualifying for the credit must be completed by December 1, 2009.

There are also tax credits for the purchase of energy-efficiency upgrades and hardware for the home. In many cases, it is possible to save up to 30% of the cost of qualified new equipment—and then to save on energy bills in the future. Your homebuyers should know about these programs as long as possible before their expiration through your letters, newsletters, and personal calls.

2. The termination of tax credit programs and any other programs designed to stimulate the housing market could be treated as an indication that the economy is moving toward sustainable recovery. If the indicator proves reliable, then home prices and mortgage rates could begin to gradually firm. If so, we will still face a window of opportunity, with low prices, attractive mortgage rates and an inventory that is varied enough to provide a desirable home to most buyers. Key idea: As the market improves, it is a particularly good time to buy.

Possible Help for Sellers

3. Homebuyers and sellers should be alerted to the fact that there is much to be learned from the movement of home values in the coming months, especially in the local markets. There is a chance (should confidence in a recovery take hold) that prices might rise more than most economists expect them to, especially in the earliest stages of the recovery. This may increase the likelihood of an agreeable home sale.

None of this is certain, of course, and your treatment of it in your own marketing materials should make this clear. But it is all worthy of consideration. Those who qualify as “first-time buyers” owe it to themselves to look at the benefits of purchasing today. Those who have been waiting for prices to bottom may find it wise to buy a home at today’s prices and mortgage rates. And those who have been waiting, sometimes with urgency, for a chance to sell their home may find, relatively soon, reason to put their home on the market at a price that is in accord with market conditions.

And remember—uncertainty is a key word. The economy has been and most likely will be unpredictable for many years to come. Make sure that you, as a real estate professional, have the most reliable and effective assistance in all your real estate transactions. And that includes creating a “working relationship” with your mortgage loan officer.

¹ See, for example, Federal Reserve Board Chairman Ben Bernanke’s comments at an August 21 conference: “After contracting sharply over the past year, economic activity appears to be leveling out, both in the United States and abroad, and the prospects for a return to growth in the near term appear good.”
² 2009 First-Time Home Buyer Tax Credit, from American Recovery and Reinvestment Act of 2009