| November 2009 Market Update | |
 
The Tax Credit Factor: Bottom line – the tax credit “worked”. It REALLY worked! When you look at October and November numbers, it is very clear that many buyers were draw to taking action in Chester County because of the Home Buyer Tax Credit. This is apparent when looking at several factors. First is percentage increase in sold activity over the same time last year. On average, Chester County saw an increase of 76% in the number of homes that sold. It is also apparent when you look at what the number of homes that are actively for sale. It dropped inventory levels down to below 2006 levels. If that trend can be sustained, which we have our doubts about, that will be a positive sign.
Another sign for the Tax Credit Factor is the fact that the average sold price has taken a nose dive. PLEASE DO NOT mistake this figure for average home value in Chester County. This figure is just telling us where the average SALE price is. And the fact that it has headed south so drastically in the last 3 months is because a majority of the activity has been in the First Time Home Buyer price range. In Chester County, we consider that any home under the $300,000 mark. In that case 62% of the activity in the last 3 months has been in the category. So, in the end, if congress and the lobbyists wanted to stimulate market activity with the Tax Credit, they achieved their goal.
Unfortunately, we see some negative side effects to this “Tax Credit Factor” here in Chester County. First, it has created an artificial market. What we mean by that is that you have buyers in the market that wouldn’t otherwise be there, thus creating an artificial environment that causes prices to either to be sustained or go up. we have had many clients this year that multiple offers on a home they wanted to buy. This causes them to have to buy the home at a higher price than they would have otherwise. That isn’t bad in and of itself, if the prices were going back up. But this market is artificial and not sustainable. The government cannot offer the tax incentive forever and when it ends (April 30th, 2010 for now) and if the overall economy has not turned a corner to help keep prices from going further south, those home owners may face some difficulty when they go to sell in 3 – 5 years.
Of course this is conjecture, but it is a big concern. No one has a crystal ball and there is no way to tell exactly what the market will do. But, if this level of activity could be sustained, it would be a very positive sign. we don’t believe it is and when we do the first report of the new year, we believe the numbers will fall back in line with the trends from the first half of the year, with the activity continuing to slow, but prices may come back up.
Our best advice: If you are a seller, as we have been saying, unless you MUST SELL, don’t put your home on the market. And if you MUST SELL, make sure you get an agent or team that is selling in this market. The longer your home sits on the market, the worse it is for the wear, and the market has dropped while you waited. If you are a qualified, ready buyer this market still remains one of the best times in history to buy a home. As we write this, the interest rate for a 30 year conventional loan is around 4.75% which is historically low. You also have a tax incentive for first time home buyers and move up buyers.
If you are going to be buying or selling a home, and want the best real estate agent(s) possible, please contact us as we would be honored to help you with your real estate needs.
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