Potential homebuyers have few incentives to shop now that the federal tax credit is gone, especially during the traditionally slow summer months, Washington-area real estate agents say.
The real estate-tracking firm Radar Logic reported “precipitous declines” in new- and existing-home sales from June to July. And the National Association of Realtors says the supply of existing and new homes for sale has increased in recent months, in another sign of a sales drop-off.
Agents say potential buyers have grown tentative after the $8,000 federal homebuyer credit expired, and are waiting to see how far mortgage rates — already at record lows — will drop.
“People that normally would be buying are probably taking their time on it,” said Ken Montville, a Maryland real estate agent who works primarily in Montgomery and Prince George’s counties.
“It’s partially because the [$8,000] tax credit has disappeared,” Montville said. “I also think that mortgage rates are declining noticeably and so buyers are waiting on the sidelines to see how low they’ll go.”
David Dowies, principal broker at Portfolio Realty in Centreville, said he has seen an increasing number of houses sit on the market for more than 100 days, another sign of stagnation.
“It just doesn’t seem like things are moving,” Dowies said.
Despite the low interest rates, prospective homebuyers are struggling to secure loans from jittery lenders, Dowies explained. He said those buyers that do enter the market often end up waiting for months to close on foreclosure properties or “short sales,” which typically require a longer sales cycle.
But every cloud has a silver lining.
The foundering housing market has provided a boost to the area’s already strong rental market.
“There’s definitely been an increase in rentals,” said Yale Scott, an agent for Sotheby’s.
The D.C. rental market is the sixth-most-expensive in the nation, according to a study published earlier this year by the Center for Housing Policy. An average two-bedroom apartment in the District rents for about $1,500.
“Whenever the economy is slower, more people tend to rent and hold off on purchasing,” Scott said. “I know right now rentals will go on the market and be gone in one or two days.”
Scott said it was also common for homeowners to sell their house, and then end up renting it back from the new owners while they search for a place to live.
“People put their house on the market without a plan,” he said.
