High end likely out of luck with tax credit extension
So now we are down to the wire with the extension of the home buyer tax credit.
There’s the usual horse trading and posturing and 11th hour deal making Washington as the end of the month deadline fast approaches – at least this time it’s just the real estate market we are talking about and not the entire global financial system.
The extension, when it finally gets hammered out, is likely to include trader uppers as well as first-timers.
There are even signs the income limits will be boosted, with a Senate proposal of a cap of $125,000 for single buyers and $225,000 for couples.
If it survives to the final bill, that might help some. Still, even that increase probably falls short of providing a big boost to the high end in the Boston area, where home prices are still some of the highest in the country.
While the credit has spurred lots of activity on the low and mid end of the market, the high-end, despite some recent, positive signs, is struggling under much tougher lending restrictions.
Just check out these numbers on home prices and sales in some of our ritziest surburbs. After years of never ending price increases that bucked the downturn, reality has finally caught up with towns like Weston and Lincoln.
The numbers, year-to-date through September, come from the Warren Group, publisher of Banker & Tradesman, for whom I do a weekly column as a freelancer.
• Median prices fell nearly 12 percent in Weston, to $1.2 million. Sales were off roughly twice that, by 22.6 percent.
• Wellesley’s median price is down under $1 million, having fallen 14.4 percent to $906,250. Sales are off 23.5 percent.
• And Lincoln also tumbled out of the million dollar club, with prices plunging nearly 20 percent, all the way down to $825,000.
Clearly the woes of the jumbo market, which our wounded banks have been skittish about getting deeply involved with again, are taking a toll here.
That said, there have been signs that interest rates on jumbos are coming down, narrowing the gap with traditional mortgages that have enjoyed rock bottom rates.
There does appear to be a thawing of the jumbo market in recent weeks, and the year-to-date numbers don’t necessarily reflect that.
Still, the downpayment requirements are pretty stiff now – you need to cool $400,000 to $500,000 now in the bank to come up with 20 percent or 25 percent for a $2 million home.
Why not just take income limits off the tax credit altogether?
How much that would boost high-end sales is another question, though it probably couldn’t hurt.
At the least, it might restore some upward mobility to the market instead of just fueling bidding wars among first-time buyers for those elusive, Boston area starter homes.
