Ah the glorious Home Buyer Tax Credit. Consumers lust for it, and NAR spent a fortune getting it extended. Realtors are indeed finding it a valuable incentive for business this year.
And housing stimulus goes beyond the tax credit too, the feds are pumping money into mortgages, keeping rates on conforming loans ridiculously low.
But Uncle Sam doesn’t do jumbos. And while eight grand makes a big impact on a $150,000 home. For a $750,000 home, not so much. Besides, if I can’t get a jumbo loan, who’s going to use it anyway? So all the money is aimed at the entry points in the market.
All sounds good, I suppose. But is it working? Maybe too well. In city after city, housing demand is active at the entry level and dry everywhere else.
Check it out. This chart shows the 40 largest metro markets in the US, each divided into four price range quartiles. We looked at the Days on Market and Absorption Rate for each. (note: the absorbed stat is measured as of last Friday and is not exactly a count of everything “sold”, closings take a while, contracts fall through. The actual sold won’t be known for a few months, so this number is close enough.) Red is bad relative to the whole country. Green is good. Click through to get the full chart.
Notice that in almost every single metro housing demand, as indicated by higher absorption rates and lower time on market, is significantly more active in the bottom price quartile (4) and gets weaker as you climb the price range.
As a result of all these goodies, the US Housing market is now like the retailer with a predictable clearance-sale schedule. No one wants to buy at regular prices. I can wait till Boxing Day.