First-time homebuyers accounted for a record-high share of purchases last month, according to new data released this week by Campbell Surveys. The results aren’t entirely unexpected, considering the April 30 contract deadline to receive the federal homebuyer tax credit is fast approaching.
The momentum from the tax break is likely to continue into this month, as many lenders are still reporting a flurry of contract activity just ahead of the cut-off date.
The government’s initiative to stimulate home sales has worked, incentivizing sidelined homebuyers to seize the moment … and the extra cash. But some economists have warned that sales are being pulled forward to make the tax credit window, and as a result will slip fairly substantially in the months ahead. There are no plans to extend the credit again.
While round two of the program added payouts to existing homeowners making new purchases, the credit still seems to have the most draw for first-timers. The Campbell survey found that 48.2 percent of March’s home purchase
transactions were attributable to first-time homebuyers. This eclipsed the previous peak of 46.9 percent reached last October when the November expiration of the original homebuyer tax credit sent purchases by first-time buyers soaring.
“The strong participation of first-time homebuyers this spring is a welcome surprise,” said Thomas Popik, research director for Campbell Surveys. “Many observers had felt that the pool of first-time homebuyers had been depleted last fall, but this is turning out not to be the case. Instead, the normal spring-summer buying season is combining with the tax credit to produce blow-out results for first-time homebuyers.”
The surge in first-time buyer activity in March came at the same time the volume of distressed properties in the housing market climbed to over 50 percent, according to the survey. This was far above the distressed share low of 37.3 percent recorded in November, when a combination of government-mandated loan modification efforts and foreclosure moratoriums significantly reduced the inventory of distressed properties on the market.
According to the Campbell survey, first-time homebuyers are particularly attracted to what has turned out to be one of the most popular forms of distressed home sale transactions – the short sale. The latest survey found that short sales accounted for 18.6 percent of the housing market in March.
“None of the survey results take into account the new Home Affordable Foreclosures Alternative (HAFA) program for short sales,” commented Popik. “This government program took effect in early April, so we expect short sales to account for an even greater proportion of the real estate market in coming months.”