Tax credits giveth, and then, tax credits taketh away.
And the local housing market suffered through the second half of that age-old equation in July, a month which saw existing home sales fall a staggering 38 percent compared to the same period last year.
Call it a "pause," call it a "lull," call it "falling off a cliff" (and we've heard it called all three at Building Blocks HQ this morning), whatever you call it, the numbers are a striking turnaround from the hopping market found just a few months ago. But there's consensus on why: The end of the $8,000 tax credit for first-time homebuyers.
Until an 11th-hour extension, that credit had a closing deadline of June 30, which means July was the first month of the new, post-tax credit numbers. So this decline was expected. It was just steeper than most people thought.
Nationwide, sales fell 27.2 percent from June to July, on a seasonally-adjusted basis, according to the National Association of Realtors. That's almost twice the rate economists expected. Year over year, sales fell 25.5 percent.
This is what happens when you borrow sales from the future, which is essentially what the tax credit did, notes housing economist Tom Lawler on the blog Calculated Risk.
So… what did we learn from the home buyer tax credit? (1) “if you pay them, they will come”; (2) if there is a deadline, they will rush to meet the deadline; and (3) when the deadline is over, sales will fall WAY below trend!
Now, the question becomes: What happens next? Will sales rebound in the next few months? Even the Realtors say don't count on it. NAR's chief economist Lawrence Yun says this "pause period" is likely to last through September. Beyond that, it mostly depends on the job market.
"Significant boosts in economic development, employment and consumer confidence [are] needed to generate a balance of supply and demand for housing," said Deb Campbell, president of the Realtors Association of Southwestern Illinois.
Locally, there were some bright spots.
Median prices climbed in some parts of the region, up 14 percent in St. Louis County and 7 percent in St. Charles. At $153,700, St. Clair County recorded its highest median price in more than five years.
| County | Sales | Median Price | ||||
|---|---|---|---|---|---|---|
| July '09 | July '10 | Change | July '09 | July '10 | Change | |
| St. Louis County | 1,349 | 851 | -36.9% | $140,000 | $160,000 | 14.3% |
| St. Charles | 461 | 255 | -44.7% | $168,700 | $180,000 | 6.7% |
| Madison | 290 | 186 | -35.9% | $111,500 | $127,250 | 14.1% |
| St. Louis City | 355 | 185 | -47.9% | $137,000 | $85,000 | -38.0% |
| St. Clair | 246 | 172 | -30.1% | $125,000 | $153,700 | 23.0% |
| Jefferson | 209 | 127 | -39.2% | $144,000 | $138,000 | -4.2% |
| Franklin | 65 | 56 | -13.8% | $123,250 | $142,250 | 15.4% |
| Warren | 44 | 34 | -22.7% | $140,500 | $124,500 | -11.4% |
| Monroe | 29 | 28 | -3.4% | $170,000 | $178,450 | 5.0% |
| Lincoln | 43 | 25 | -41.9% | $127,000 | $106,000 | -16.5% |
| Clinton | 28 | 15 | -46.4% | $107,250 | $85,000 | -20.7% |
| Total | 3,119 | 1,934 | -38.0% |
That doesn't necessarily mean people's homes have increased in value, but it's likely a sign that more high-priced homes are selling, which is a healthy sign for the market. Local realtors say they're still seeing strong activity, even if it's not translating into more pending sales just yet.
But the dismal July pretty much wiped out all the housing market's gains so far this year. Through the first seven months of 2010, there were just 14 more homes sold in the St. Louis region than there were last year. That's one-tenth of one percent. And, as you may recall, the first seven months of 2009, back before the $8,000 tax credit took hold, were pretty miserable when it came to housing.
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