September sales reflect rush to beat credit deadline

Right on cue, buyers appeared to rush the door before the December 1 tax credit deadline. In the Cincinnati market, home sales increased over 10% on a year over year basis. Some of the local and national figures that grabbed headlines include:

• A 9.2% increase nationally (10.55% locally) from September '08 in existing home sales
• A 6.4% increase in the pending home sales index, with 7 monthly increases in a row making it the longest streak since 2001.
  
• A 1.2% increase in the national average home price from the previous month. The 4th month in a row for increases.
  
• The level of sales to inventory continues to outperform the 3 previous years. Locally, the ratio fell to 7.4 months of inventory. Particularly unusual to see a drop from August to September.
  

While many analysts are declaring that a market bottom has formed, there are still many signs that the market recovery will be bumpy at best. Some of the telling signs include:

• The average price year over year is still down 11.3%, much of this attributable to first-time buyer purchases at the lower end of home sales.
  
• New home sales dropped dramatically - 3.6%. A big fall off likely due to builders no longer able to guarantee completion before the tax credit deadline.
• The "shadow" market is gaining attention. That's the large inventory of homes still sitting on the books from banks waiting for foreclosure action.
  

Debate continues on whether to extend the tax credit beyond December and what will happen if it goes away "suddenly." Some are still trying to make it under the wire with such last minute ideas as using short term land contracts or lease-purchase arrangements. The latest news at the time of writing is that the credit is likely to be extended to April, 2010 with some expansion - but nothing is definite yet.

Another potential impact on the market are changes to FHA lending rules on condominiums. Currently, rules are expected to take effect December 7th on what condos qualify for an FHA mortgage. While the actual guidelines are still being tweaked (and thus causing two delays on implementation so far from the original Oct. 1 date), it appears the gist of the changes is to avoid a majority of condos in a given development being financed through FHA loans and minimize the level of risk.

If nothing else, the winter home market may prove a bit more interesting than usual.

• September sales statistics from the Cincinnati MLS