Whatcom County brokers reported 283 pending sales during the month of April, representing an increase of more than 70% from the same month a year ago. MLS figures show local home inventory has increased 14.3% during this same period, closed sales jumped by almost 15%, and median sales prices dropped nearly 4%.

Homes For Sale Vs. Sold Vs. Pending Vs. New Listing

The following graph compares the number of homes for sale vs. the number of homes sold vs. the number of pending sales vs. the number of new listings, between Feb of 2009 and April of 2010 (click to enlarge).

The Homebuyer Tax Credit Impact

The homebuyer tax credit did what it was designed to do: it helped with stabilizing the housing market, which in turn helped stimulate the economy. You can see how the number of pending home sales rose consistently leading up to the expiration of the homebuyer tax credit, in the graph above.

However, the market remains bifurcated, with the lower end (under $300,000) selling and the high end (over $500,000) struggling. Price is incredibly important, especially when it comes to high-end homes.

There are two types of homes on today’s market: 1) Well-priced homes in good condition that are selling within 60 days, and 2) Over-priced homes that will be sitting on the market a long time.

Moving Forward

Moving forward, local home buyers will continue to experience a purchase power advantage thanks to historically low interest rates and lower adjusted home prices.

2010 So Far

Lastly, here’s a table that summarizes a plethora of local housing statistics for the first four months of this year:

*All reports are published May 2010, based on data available at the end of April 2010. This representation is based in whole or in part on data supplied by the NWMLS. Neither the Board or its MLS guarantees or is in any way responsible for its accuracy. Data maintained by the Board or its MLS may not reflect all real estate activity in the market. Report reflects activity by all brokers participated in the MLS.

The House of Representatives has voted to pass legislation extending the homebuyer tax credit until April 30, 2009.

Last night, the Senate voted 98-0 to pass the legislation. Next, the bill will head to President Obama to be signed into law.

Not Just for First-Time Homebuyers

While the bill extends the $8,000 tax credit for first-time homebuyers, it also makes available a tax credit to homeowners who have lived in their current residence for at least five years.  The credit for these buyers will be capped at $6,500.

Income levels will be extended from the current limits of $75,000 for a single purchaser and $150,000 for couples to $125,000 and $225,000, respectively.  Above those limits there are diminishing credits available.

Housing interests, especially the National Association of Home Builders and the National Association of Realtors, have pushed strongly for the extension, and the Obama administration has also lobbied heavily for its passage. However, not everyone was in favor of it.

Critics of the Housing Tax Credit

Some critics have charged that the tax credit has merely moved sales that would have occurred sooner or later to an earlier date and that, when the credit finally does go away, the market will experience another severe downturn. A diametrically opposed opinion would have it that, while 1.4 million claims have been made, few sales were actually inspired by the credit (i.e. these sales would have occurred with or without the tax credit). Others have argued that the current interest rates and low housing prices are enough of an incentive without spending tax money. The extension is expected to cost an estimated $11 billion on top of the $10 billion that has been spent to date.

There have also been charges of fraud in the operation of the program. To combat this, the new law has some expanded safeguards, including a minimum age of 18 for obtaining the credit, a requirement that a settlement statement accompany the tax return claiming the credit and a prohibition on non-arms length transactions.

Another criticism of the extension has been that it ends just as the “spring market” is getting underway.  Diane Olick, writing for CNBC’s RealtyCheck, said it “is sort of like offering cheap snow boots in July.”

Robert E. Story, Jr., CMB, Chairman of the Mortgage Bankers Association (MBA), today issued the following statement in response to the passage in the U.S. Congress of legislation to extend and expand the homebuyer tax credit:

“At a time when we are finally starting to see some signs of life in the housing and mortgage markets, extending and expanding the homebuyer tax credit is a critical step to keeping the momentum. This has been one of MBA’s top single-family legislative priorities, and we are very glad to see that policymakers on both sides of the aisle see the importance of this measure.

“The existing credit for first-time homebuyers has helped move a segment of potential homebuyers off the sidelines and into their first homes.  By expanding it to qualified existing homeowners, we can help stimulate even more home purchases for qualified buyers.  I also want to applaud measures in the bill that will help eliminate fraudulent use of the tax credit.”

The Homebuyer Tax Credit is Net Positive, But Not the Universal Solution

Following a 98-0 vote in the Senate, the House of Representatives has overwhelmingly agreed to pass legislation extending the home buyer tax credit until April 30, 2009. Next the bill will head to the desk of President Obama to be signed into law.

No one argues the extension of the tax credit has value to the marketplace. But what other immediate steps must be taken — either by government or industry — to create a sustained housing recovery?

It is universally expected that interest rates will rise next year when the Fed is expected to stop purchasing MBS next year. How high, how quickly is a matter for debate.

What is not debatable is the negative impact of higher rates and an ever shrinking credit box. The extension of the Homebuyer Tax Credit will serve to soften these blows. However, a sustained recovery in the housing market must have two key components

1) Stable Employment
2) Access to Credit

In the absence of either of these components, the single shot tax credit will have limited impact. The tax credit is positive, but it’s not a universal solution.

Existing home sales surged in September, bringing sales to the highest point since 2007. At the same time, the Department of Commerce just reported that sales of new single family homes fell 3.6% in September to an annual pace of 402,000 units.

Sales of both existing and new homes had been on the rise of late, encouraging many an economist that the worst is behind us.  Some will say that the new home sales numbers show that this will be a shakier recovery than in past recessions.

That may be true, but keep in mind that home sales as a whole are up by a pretty large margin. Those sales are helping bring down the inventory of unsold homes, which is so vital to returning to sustainable times.

Analysts had expected new home sales to rise to 440,000 units, most likely based on the final push of first-time buyers looking to take advantage of the $8,000 tax credit.

Buyers looking at new homes will find some homes that are already completed and those that are not finished. First-time buyers, who account for nearly 45% of the buyers at the moment, are looking to eliminate any possible risk of missing out on the credit.  Purchasing a home still under construction without a guarantee of closing before 11/30 will push many would-be new homebuyers to existing homes.

The numbers may already be bearing this out. In September, sales of existing homes jumped 9.4% to an annual rate of 5.57 million. This is the highest rate in more than two years.

Looking at the most recent local housing numbers, most numbers are moving in the right direction, with Bellingham neighborhoods coming to life and move-up buyers re-entering the market.

Recovering Market
The variable results we saw in July reflect what we’d typically expect from a recovering housing market—a few steps forward for some neighborhoods, a step back for others. Whereas comparisons to a year ago reflect some substantial gains, on a month to month basis, we’re probably going to experience some “spongy” results for a while.

Tax Credit Motivation
First time buyers are motivated by a looming deadline for the federal $8,000 tax credit, which is propelling activity. There seems to be a feeling of urgency to take advantage of this program before it goes away on November 30, 2009.

Pending Home Sales Stable
The Whatcom County housing market continues to show mixed signals, but the most important number, pending home sales, is trending in the right direction.

Pending sales are contracts that are accepted by a seller but have not yet closed. They represent the most current activity and show how active buyers are in the market. Nationally, the Pending Sale Index has increased for five consecutive months. Even though Whatcom County was about even from July 2009 to July 2008, the trend is positive. I expect the Pending Sales Index to continue rising over the next few months.

Inventory Levels Flat
While the local housing inventory levels have ebbed and flowed during the past year, recent numbers are pretty flat from this time last year. Currently, our market is at about 7.8 months of inventory (which is the current amount of inventory divided by the average monthly sales).

Closed Home Sales Down Slightly
Unfortunately, the number of closed home sales in July 2009 was down 3% from a year ago, logging 213 sales versus 220 in July of 2008. After June sales posted only the second consecutive month of year-over-year increase in about two years, it is disappointing to see fewer sales in July.

The difference in the performance of closed and pending sales is due primarily to the fact that many local sales are simply taking longer to close. Short sales, where the net proceeds to the seller will not cover the outstanding debt on the property, are taking 60 to 90 days to close, as the buyer and seller must wait for the bank to approve the sale.

Looking at the local real estate numbers for the month of June, I’ve noticed some pretty encouraging trends. Here’s what stood out to me:

Fewer Homes Listed, More Under Contract
For starters, the year-over-year positive movement is encouraging. Compared to 12 months ago, Whatcom County has 372 fewer homes (-10.5%) listed for sale and 107 more homes (8.5%) under contract. This is an improvement that will hopefully sustain itself over the second half of the year.

Pending Sales Up, Closed Sales Down
It’s also reassuring to see that the number of pending sales are at their highest level since the credit bubble burst nearly two years ago. Year-to-date pending residential sales are up 8.5%, while closed sales are down 19%. However, the number of closed sales for 2009 are increasing in the last two months.

Tax Credit Working
All of this means the $8,000 tax credit is working: low interest rates and declining inventories have helped to reactivate buyers in the more affordable price ranges. The federal tax credit of up to $8,000 is available for qualified first-time home buyers purchasing a principal residence before December 1, 2009.

More info on this tax credit for first-time home buyers can be found here.

Median, Average Prices Down
The overall median price in Whatcom County is down 6.3% and the average price is down 10%. While the median and average sales prices for Whatcom County homes are both down, prices have flattened over the past seven to nine months.

Neighborhoods
Data shows some local neighborhoods are rebounding faster than others. It appears to be a transitional market, and accurate neighborhood information is critical for buyers and sellers.

Short Sales Are A Drag
Short sales continue to be a drag on the market, frustrating agents, buyers and sellers. Even though we have fared better than most areas of the country we still have an abundance of short sales. This is a big reason the median price is shifting down to levels equal to 2006.

Inventory Levels Down, But Balancing
Residential inventory levels are down 10.5%, but local inventory levels are trending toward a more balanced market, with sales below $350,000 showing a Seller’s Market.

For the month of June, Whatcom County monthly inventory levels were at 7.6 months (meaning it would take an average of 7.6 months to sell all of the currently available inventory). Year to date, the monthly inventory level in Whatcom County was at 12 months. Six months is considered a balanced market.

This trend varied very little throughout the individual cities in Whatcom County, with Bellingham at 5.2 months of inventory for the month of June. When we look at more expensive homes, they averaged 24 months in the county, while Bellingham was at 18 months.