By Andy Greder, Duluth News Tribune, Minn.
Oct. 26--Newlyweds Julia and Jon Morris experienced a fleeting honeymoon.
When the Duluth couple got married in the spring, they began a house-hunting search in earnest to cash in on the first-time homebuyer tax credit as part of the federal stimulus package.
The Morrises sought up to $8,000 with the purchase of a new home before the credit expires Nov. 30, but as the 25-year-olds soon found out, they were not alone.
While overall sales in the Duluth area have slipped 4 percent in the first nine months of 2009 compared to 2008, sales of homes priced less than $150,000 are up 9 percent, said Mike Peller, president of the Duluth Area Association of Realtors. In contrast, sales of homes priced more than $250,000 went into a 20-percent freefall.
"The bright spot has been under $150,000, and that is because of the first-time homebuyer tax credit," Peller said.
The Morrises skipped a honeymoon trip to save money and jumped into the house hunt after two years of renting an apartment.
"We thought it was about time to buy a house, but the tax credit certainly made us really think that we should do it right now," Julia Morris said. "It's such a good deal."
The Morrises found that deal and will close on a four-bedroom, 1,800-square-foot home in western Duluth for $136,500 on Nov. 16.
If you haven't already made an offer on a house, the opportunity to receive the credit has all but run out because it would be difficult to complete a closing before the deadline, said Kathleen Busche, a licensed broker at Edmonds in Duluth. But for procrastinators and laggards, the U.S. Congress has begun discussing a possible extension.
"The latest [news] is that legislators are receptive, but we don't have a commitment," Peller said.
Busche said the tax credit has led to a bevy of positive repercussions in the Duluth real estate market -- mainly keeping prices steady and not leading to inflation.
"I have not seen values go up, and that was one of the things that I thought was a little concerning," said Busche, who has 16 years of real estate experience. "I have not seen market inflation at all. I recognized that could have been a possibility because when you have that many more people in the market, it could push values.
"If we've seen anything, it has stabilized that first-time homebuyer market," she said. "If we hadn't seen these first-time homebuyers right now, we could have seen a drop in those prices."
The Morrises, self-described picky shoppers, checked out more than 40 homes in seven months.
About two months ago, they toured a home that they liked, but before they could act, the home was sold the next day.
"For some reason, you would think there would be a lot of options out there because of the tax credit," Julia Morris said. "I think there were a lot of people in our income range looking for housing, but we finally found one."
The tax credit is helping sell houses, but they're still not moving particularly fast. Homes in the $100,000 to $150,000 price range have stayed unsold on the market an average of 65 days in the first nine months of 2009, compared to 59 days in 2008, Peller said.
"It's starting things moving," Busche said. "It certainly isn't the answer, but it has been a great program because ... it's so logical to help people into housing."
Jill Winkler, a mortgage loan originator at North Shore Mortgage, said this incentive program is different than previous pushes into homeownership that led to the market crash last year.
"People are much more attuned to what their monthly payment is going to be and how they felt that they can handle it rather than what the maximum is we can approve them for," Winkler said. "They are more conscious of that."
Busche said the tax credit also has had a trickle-up effect.
"The other layer which shows that the stimulus piece is working is that not only are first-time homebuyers getting into the market, but that person that wants to move onto their second house," she said. "I'm seeing movement there. People are saying, 'I can sell my house now because the first-time homebuyers are out there now. I can sell my house and go into my second home.'"
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