Solid Traffic, Driven by First-time Buyer Tax
Credit
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Traffic up slightly; highest demand levels seen in investor-heavy
markets. Our Monthly Survey of Real Estate Agents indicated another
increase in traffic levels in August, with the key theme being buyers moving
forward to take advantage of the first-time buyer tax credit before it expires
at the end of November, along with demand from investors looking for
foreclosures. Our buyer traffic index inched up to 44.5, from 43.4 in July. The
traffic index has shown traffic near the expectations of agents (a reading of
50) for five months. The foreclosure heavy markets continue to see multiple
bids on foreclosure sales and a heavy investor presence.
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Arizona, California, Florida, New York, and Washington, D.C. saw the
highest traffic levels. In general, it was the typical foreclosure heavy areas
that saw the highest levels of traffic, but we also saw noticeable
improvement in Atlanta, Chicago, Los Angeles, and New York. For Atlanta
and Chicago this is a quick rebound after one weak month. The
improvement in NY likely reflects stronger demand, as a result of
improvement in the financial markets, and some pent-up demand after many
months of limited activity.
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First-time buyer tax credit helping buying to get “off the fence”.
Throughout the markets, we heard frequent mention of first-time buyers
making purchases now (or looking with the intent to make a purchase
shortly) based on the first-time buyer tax credit. We hadn’t sensed a
dramatic impact from this in prior months, but the coming expiration of the
tax credit (closings must occur by November 30th, meaning that most
contracts should be signed prior to the end of September or early October)
has brought more of these buyers into the market. The expiration of the
credit could create a lull in demand (if demand is pulled forward), but we
think that the improving tone to the markets and positive momentum are
likely to mean more to buyers than would the $8,000 tax credit.
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Price declines still occurring on higher-priced homes, but low end
stabilizing. Our price index moved slightly higher in August to 34.5, from
33.6 in July. In many markets, we heard of multiple bids on foreclosures and
low-end homes, with prices appearing to have bottomed for those price
points. Agents indicated rising prices over the past 30 days in the Inland
Empire, Los Angeles, and Washington, D.C., with stable prices in Dallas, Ft.
Myers, and near-stable in Phoenix. Agents saw the weakest pricing trends in
Atlanta, Austin, Charlotte, and New York.