Expiring tax credits drive home buying
A sign sits in the front yard of a home being offered for sale in Pleasant Prairie, Wis.
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Kai Ryssdal: Spring was in the air last month. At least if you're in the real-estate business. The National Association of Realtors reported today that existing homes sales rose in March. With some juicy tax credits about to expire though, this may be the last good news the housing market gets for a while.
Marketplace's Mitchell Hartman explains.
MITCHELL HARTMAN: There's an $8,000 tax credit dangling out there for first-time homebuyers, and $6,500 if you're trading up. But you have to sign the contract by next Friday.
CARMEN RYAN: I am actually in the middle of helping some buyers, and we are against that April 30th deadline.
Broker Carmen Ryan in Portland, Ore., says she's been very busy, especially with first-time homebuyers.
RYAN: This current uptick in sales is definitely driven by the tax credit. The tax credit does give an artificial bubble, somewhat.
A bubble that will start to leak once the credits for homebuyers expire, says economist Patrick Newport at IHS Global Insight.
PATRICK NEWPORT: I think what the housing market needs going forward is a good economy and mostly job growth, and not these tax credits that mostly just shift sales from one period to another, but don't elevate the level of sales all that much.
Newport says home prices also need to hit rock bottom before buyers jump in in bigger numbers. And that may take a while. There are still millions of homes in foreclosure or headed that way. They'll all hit the market sooner or later.
NEWPORT: There's a big glut of homes out there for sale, and in order to get rid of those homes, prices probably have to drop we think another 5 percent.
That's something would-be homebuyers like Lonnie Wentworth are keeping in mind.
Wentworth is 33. He has a good job as a nurse in San Antonio, Texas, and a growing family.
LONNIE WENTWORTH: I mean, we don't want to rush into things, and we've just been taking it easy.
Wentworth says he and his wife have been looking. And the tax credit made them look harder. But they've decided to wait for a better deal.
I'm Mitchell Hartman for Marketplace.