Home sales set to plummet in markets hit hard by foreclosures.
New home salesin Phoenix and Las Vegas, two U.S. markets hardest hit by foreclosures, are set to plunge as a federal tax credit for homebuying expires, according to data from real estate researcher Metrostudy.
A sample of subdivisions in both cities showed sales contracts for new homes “pulled back sharply in May and contract cancellations spiked,” Houston-based Metrostudy said in an e-mail. Would-be buyers canceled about 40 percent of new home contracts in San Diego in May, up from 10 percent in April, the company said. Data on new signings in that city weren’t immediately available.
Sales indicators fell after April 30, the last day for homebuyers to sign contracts in time for a federal tax credit of as much as $8,000 for first-time purchases and $6,500 for certain “move-up” buyers. The deadline may have hurried customers to snap up properties when they otherwise would have waited, said Brad Hunter, chief economist based in Palm Beach Gardens, Florida, for Metrostudy.
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In Phoenix, contracts in the subdivisions surveyed by Metrostudy fell almost 49 percent for the week ended May 24 from the same period a year earlier, Hunter said. More than 8 percent of Phoenix households received a notice of default, auction or foreclosure in 2009, ranking the city the eighth worst in the country, according to Irvine, California-based research company RealtyTrac Inc.
Signed contracts in Metrostudy’s Las Vegas subdivisions dropped 12 percent for the week ended May 24 from a year earlier. They climbed 220 percent in the last week of April, an indication of buyer interest in capturing the tax credit before it ended, Metrostudy said.
Las Vegas had the highest rateof foreclosure filings in the U.S. last year, with 12 percent of households receiving a notice, according to RealtyTrac.
So the short-term plan of offering an incentive to buy a home worked, but at what cost after the program ends?
The tax credit helped push U.S. new home sales up 15 percent in April to the highest annual pace since May 2008, the Commerce Department said May 26.
“We had this large spike before the tax credit expiration and now we see the downside of that,” Hunter said in an interview. “Based on this research, it seems that a post-credit pullback is under way.”
Larry Seay, chief financial officer of Meritage Homes Corp. of Scottsdale, Arizona, said demand has dropped across the company’s markets, which include Phoenix, Denver, Houston, Las Vegas, and Orlando, Florida.
“The tax credit during the first four months of the year did positively impact sales,” Seay said. “We’re seeing a bit of a fall since then.”
It's Cash for Clunkers redux. A big month or two in sales, then it's business as usual. Unfortunately, "business as usual" is not good at this time. I'd love to see someone cross-reference "Cash for Clunkers" and "Free Money to Buy a House". I wonder how many names appear on both lists.
