Tax Credits, Foreclosures Likely to Affect Winter RE Market

Foreclosures Expected to Significantly Increase Inventory in 2010, But Possible Tax Credits Could Help Spur Demand, According to Q3 2009 Zillow(R) Real Estate Market Reports

Editor's Note:  Data for Dallas/Fort Worth and the state of Texas were not included in this study...I don't know why. I'm including the report, though, to show that home values appear to be stabilizing across the country.  You can read the entire study here.The percent of American single-family homes with mortgages in negative equity fell to 21 percent in the third quarter, down from 23 percent in the second, as home values stabilized in the short term and more underwater homeowners lost their homes to foreclosure, according to the third quarter Zillow Real Estate Market Reports.



"The decline in the percentage of homeowners with negative equity is a positive sign, and is directly attributable to the stabilization of home values from the second quarter to the third," said Zillow Chief Economist Stan Humphries. "It is also attributable to many homeowners who were previously underwater on their mortgage losing their homes to foreclosure.


"The next several months will be critical to the housing market. Previously, we'd been expecting to see increasing foreclosure rates during the real estate market's slow winter season, a confluence of events that would likely drive inventory up and prices down. But now, with the extension of the $8,000 first-time homebuyer tax credit and a new $6,500 credit for some repeat homebuyers, we could see a bump in demand that could partially offset the increased supply of foreclosed homes on the market. The credits are likely to bring continued stabilization in prices over this period, versus the price declines that we almost certainly would see otherwise. Whether this stabilization will be sustainable after the tax credits expire, however, is yet to be seen. Some of the demand that we are buying with tax credits we are also borrowing from the future, and will likely have to pay for later in the form of weaker-than-normal demand."


SOURCE Zillow.com