Utah Real Estate Update and Market Condition Watch

My good friend and collegue, Taylor Clark, was telling me yesterday about some of the talk by NAR and legislatures to extend the federal housing tax credits for first time, and move up buyers. These tax credits are currently scheduled to expire at the end of April. The first time buyer tax credit has already been extended once from its original expiration date in November.

While the tax credits have served their purpose, and have clearly had an impact on the Logan Utah Real Estate market, (especially by increasing the number of home sales of low end homes) we can’t rely on these government handouts forever. Extending the housing tax credit is detrimental in three primary ways:

1. An extension takes away the urgency of buyers to buy during the traditionally slow winter and spring season. Taylor was telling me about one buyer he had who had an offer in on a house before the expiration of the first tax credit, but when it was extended, withdrew his offer in hopes of finding something better. He still doesn’t have a place under contract, and likely won’t until the deadline actually comes up. If a new deadline were made before the expiration of this one, it would simply postpone buyers urgency and reduce the impact of the stimulus.
2. The summer is traditionally the strongest time of the year for real estate in Utah anyways. People are going to be purchasing Utah Homes regardless of if there is a tax credit or not. An extension won’t do much to actually stimulate additional real estate activity, but mostly just rewards those that do buy while it is offered. One estimate I read said that the average cost per real estate sale actually produced by stimulus was more than $40,000. Most buyers are going to purchase with or without government incentive.
3. The real rate of return on this, and all stimulus is probably not worth the investment. Good investments bring a rate of return that far exceeds the initial investment. Our national debt is high enough, and too much spending in the name of stimulus is just frivolous. It just increases our future burden. Right now it would take more than $40,000 from every man, woman, and child in America to pay off the current national debt.

It will be interesting to see what actually happens when the housing market is forced to recover by natural means. The stimulus has been good for the local real estate market, but it’s got to end some time. Personally, I think it would be a bad idea if it were extended again.