November Pending Home Sales Plunge in U.S. — and in Miami and Coral Gables

posted on January 5th, 2010 filed under: Real Estate News

The National Association or Realtors reported its Pending Home Sales Index for November, which showed a huge 16% decline from October.  The obvious reason is that the $8,000 tax credit for homebuyers was originally scheduled to expire at the end of November, so deals had to be in works before November began.

Data for the real estate market in Miami and Coral Gables are consistent with the national figures.  A quick check shows that Miami-Dade saw about 1200 properties go under contract in October and 912 in November, a decline of about 25%.  Coral Gables saw 34 go under contract in October and 23 in November, a decline of about 33%.  These figures, however, are not seasonally adjusted, and are comparable to the NAR’s national figures on a similarly unadjusted basis, which showed a 27.7% decline.

The tax credit has since been extended through April, and the income eligibility cap has been raised.  Details are available in an IRS news release.  How many buyers will the extension spur to action?  Hard to say, but probably not as many as the first time around.  The number of people who miss a deadline is usually not that large compared to the number who make it.

Raising the eligibility cap is nice, but the $8,000 has diminishing impact on higher-income buyers who usually buy higher-priced homes.  Getting $8,000 from Uncle Sam for buying a $100,000 condo in the Miami suburbs is a big deal and obviously convinced people to get off the fence and buy something.  Getting $8,000 from Uncle Sam for buying a $1,000,000 house in Coral Gables is probably inadequate to influence the decision whether to purchase.

And then, of course, there’s the whole question of how to value real estate in Miami or Coral Gables in the context of a government benefit that’s going to expire soon.  If the asset is worth $8,000 more to you now because of the government bennie, what will it be worth to the next buyer after the bennie expires?  Ah, the perils of government intervention.

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posted by // This entry was posted on Tuesday, January 5th, 2010 at 10:09 am and is filed under Real Estate News. You can follow any responses to this entry through the RSS 2.0 feed.

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