Housing market braces for cutoff of federal aid

The market has been rebounding for the last several months, with sales and prices for both new and existing homes climbing in the first quarter from a year ago, according to a report from research firm Delta Associates. Demand for housing outpaced supply for the first time since 2005, the report said.

Houses are being snapped up about twice as quickly as last spring, and mortgage rates are at record lows.

But new-home sales plummeted 33 percent last month to the lowest level on record,and existing-home sales were slightly down from April — signs that the market could slow once the federal home buyers’ tax credit expires.

“I hope it helped out a lot, but I also hope you don’t have whiplash,” added David Dowies, principal broker at Portfolio Realty in Northern Virginia.

The tax credit of up to $8,000, originally slated to end Nov. 30, was extended until April 30 to continue to boost the housing market. Buyers who signed a contract by the end of April had until June 30 to close on the contract.

“I really kind of felt that the homebuyers’ tax credit was a significant stimulus to the market,” said Jeff Werling, executive director of Inforum, a University of Maryland-based economic forecasting project.

Werling was one of more than 100 economists and real estate experts who responded to a survey on home price expectations. WhileWerling forecast modest growth for the rest of the year, 56 percent of the panelists in the June reportproject price declines for the rest of the year, compared with 40 percent in the May survey.

Mary Bayat of Bayat Realty in Alexandria agreed with Werling’s take on the credit.

“Obviously, that has affected the market,” she said. “Definitely that was a big motivator. We saw a lot of people who were pushing to buy.”

Indeed, homes were still flying off the market in May, according to local data from Metropolitan Regional Information Systems Inc.

The average days a house sat on the market dropped about 50 percent from a year earlier in both Fairfax and Montgomery counties. The median sales price for a home in Fairfax County increased about 8 percent, from $360,000 to $390,000, and about 18 percent in Prince William County, from $207,777 to $245,000.

The credit likely “pulled sales forward” that would have occurred later in the year, said Andy Bauer, regional economist with the Baltimore branch of the Richmond Federal Reserve.

But as federal aid winds down, so, too, could the hot market.

It is “pretty simple to conclude” that the momentum the market has seen is unlikely to be sustained once the tax credit wears off, said Anirban Basu, president and chief executive officer of Sage Policy Group, an economic consulting firm in Baltimore.

It is “pretty simple to conclude” that the momentum the market has seen is unlikely to be sustained once the tax credit wears off, said Anirban Basu, president and chief executive officer of Sage Policy Group, an economic consulting firm in Baltimore.

But Pauline Thompson, president and chief executive officer of Tysons Realty said agents can work with sellers to find that $8,000 from the tax credit.

Nevertheless, more homeowners who had been in good standing are finding themselves unable to pay their mortgages. The inventory of foreclosed or delinquent properties in the area that have not been put on the market would take nearly three years to clear, according to Standard & Poor’s.

“Having that sort of shadow hanging over the market … is not going to be [conducive] to a healthy market [returning],” said Diane Westerback, managing director of Global Surveillance Analytics for S&P.

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