Homeowners Stepped Up in November to Take Advantage Of Tax Credits

While first-time home buyers are reducing their buying activities; existing homeowners have stepped up their home purchases, according to the latest Campbell/Inside Mortgage Finance Monthly Survey of Real Estate Market Conditions.


Existing homeowners accounted for 41 percent of home purchase transactions in November -- an increase from 38 percent in October, according to the survey. At the same time, the number of first-time home buyers dropped from 47 percent in October to 45 percent in November.


"Our survey statistics are showing the effect of Congress’ delay in extending the homebuyer tax credit and then its eventual extension," said Thomas Popik, research director for the Campbell/Inside Mortgage Finance Survey. "The first-time homebuyers started to lose interest in October when it appeared that Congress wouldn't extend the credit. When the credit was finally extended in early November, current homeowners jumped at the new opportunity for a tax credit on their home purchases."


Before Congress decided to extend the $8,000 home tax credit, first-time homebuyers were rushing to homeownership eager to take advantage of the tax break and historic low mortgage rates.


However, in October when it looked uncertain that Congress would approve the extension, interest waned, leaving many to wonder what would happen to the fragile housing market.


Eventually on Nov. 6, Congress approved the tax credit extension to April 2010, but many experts believe that there will not be another rush of first time home buyers until closer to the deadline.


In the meantime, existing homeowners, who have been hesitant about changing residence, saw an opportunity with Congress adding a $6,500 credit for current homeowners who purchased a new primary residence, when it passed the extension in November.


Another factor as to why existing homeowners are now jumping into the housing market is an increase in the number of non-distressed property available for sale. The survey found the purchase of non-distressed property home jumped from 58 percent in October to 63 percent in November. The theory is existing homeowners tend to purchase non-distressed properties.