Feeling like the real estate market has a hangover?

Now that we are more than halfway through May, and the Tax Credit deadline has passed, the big question is…“How long will the Tax Credit Hangover last??” I wanted to update you on my analysis of the market, and in particular, the effect of the Tax Credit deadline, which was April 30th (the last day contracts could be signed). The million dollar question that everyone has been pondering is, how long will it take to recover from the huge increase in sales generated by the credit? I think without a doubt we are experiencing a “hangover”, with pending sales and showing activity way below normal for the first 2 weeks of May compared to years past.

 Here is what happened, and what I think we can expect over the next few months: 

Pending sales in April were 1143 units, the highest Pending month we have had since June of 2005, when we had 1158 Pending sales. Pending sales in March were 909 units, again way over what I would have expected as ‘normal”…without the tax credit, I’m guessing around 700 units in March, and about 800 units in April would have been normal, based on historical trends. The total impact for those 2 months was an increase in Pending sales of about 500 units over what I would expect to be a normal 2 month period. As of today, we are over half way through May, and Pending sales are at 227 units, which if we finish around 500, that number would be a record low number of Pendings for May, going back at least 9 years (we don’t have detailed stats prior to that). I would expect between 800 and 900 Pendings per month for May, June and July without the credit, so the 500 unit bubble created by the credit should be absorbed over the next 3 months, based on where we are right now with May Pendings. Based on my personal experience, I feel like the major impact of the credit was that it “pulled forward” demand, as opposed to really creating sales that wouldn’t have otherwise occurred, and I think our preliminary May numbers support that idea. I simply didn’t talk to very many people over the past year who were in the market as a direct result of the credits.

While it’s frustrating at the moment to be enduring a period of very few showings and sales, I am optimistic that we will absorb the bubble and be back to normal by the end of the summer. In the meantime, please feel free to let me know if you have more questions. I’m hoping my crystal ball is giving us an accurate picture!