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Fewer Home Sales Recorded in December

By Sally Maison
Published: Friday, January 29th, 2010

It looks like the Federal Housing Tax Credit has finally lost its appeal as home sales dropped in December after surging a few months prior to the holiday season. The tax credit was so popular during the second half last year that it prompted Congress to extend its expiration date to June in 2010. But even consumers with high credit scores chose not to buy a new home during the last month of 2009 despite the tax cut and the lower home prices during that period.

Fewer Home Sales Recorded in December Some analysts argue though that consumers did not really lose their interest on the $8,000 tax incentive for first time homebuyers. They explained that new home sales in December dropped simply because the public anticipated that the tax credit would expire by the end of last year. Hence, they opted not to look for new homes anymore.

Industry specialists note that home sales continued to surge through out the fall 2009 amidst high credit score requirements by creditors. Sales for new homes did drop in December by 16.7 percent but experts say the previous month’s total sales of 5.45 million units is still 15 percent higher than the sales in December 2008. For them, this simply means that the housing industry has not ceased yet ceased to move forward after it has recovered from the huge collapse that began a couple of years ago.

Experts made it clear that sales in December dropped because would-be homebuyers rushed to complete their loan applications before November as they try to catch up with the original tax credit deadline set by federal government. Analysts anticipate another surge in housing sales spring this year when the new expiration for the tax incentive will come to an end. By early summer, they predict that the industry would go on a relatively stable condition.

In December, 43 percent of total purchases were completed by first time homebuyers, 42 percent made by repeat buyers, while the rest were investors looking to make profit in the future when the housing industry fully recovers.

However, some experts say it could take long before the real estate market could go back to its vigor prior to the mortgage crisis. The country’s total unemployment rate currently hovers above 10 percent, making it difficult for many to have the credit score lenders require before granting mortgage.

Borrowers who want to avail FHA-backed loans need to have a credit score of at least 580. Otherwise, they will have to pay down 10 percent of a property’s total value. Those who are insured by the FHA only need a down payment of 3.5 percent.

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