Anyway, the last time the gov’t intervened in the housing market by providing a tax credit and reduced mortgage rates (as the NAHB is requesting now) was in 1975. Housing starts immediately reacted to the stimulus and turned up within 2 months. Now, keep in mind that Housing Starts typically occur (on average) about two months after the home sale (contract signed). So, what this chart shows is that Home Sales literally turned on a dime the moment the Stimulus went into effect. This should be expected . . . it’s very similar to a Black Friday sale at a retail store. The first people to get in the doors and buy benefit from having the most products available. This is why people line up outside the doors of store for hours before the doors open . . . they want to have the best selection and make sure they get to buy products before they’re sold out. This phenomenon actually caused people to get trampled this year and push the doors down at Walmart . . . which is crazy and disturbing but it shows you how badly people want to be the first to capitalize on a major sale. Well, it’s the same with housing. For those who have been waiting to buy a home and can still afford to do so, they will benefit by being the first people “through the doors” and thus get the greatest selection of homes and maybe even capitalize on Builder incentives that the Builders haven’t yet removed. And make no mistake, Builders will be very quick to discontinue their incentives once they see a pickup in housing demand. I know because I am one of these builders who intends to remove or at least reduce my incentives shortly after the announcement of Obama’s stimulus package.
So, here’s the thing that smart buyers already know . . . they can get special entrance through the side door of the housing store right now, capitalize on the sale prices, have the best selection, and have a private showing of all the store merchandise. What I’m saying is that for those who have been waiting to buy a home, the best time to capitalize on Obama’s housing incentives is right now, prior to them being announced (assuming you setup settlement for late January/early February). The only reason not to do this is if you believe that Obama will not incorporate some sort of housing stimulus into his Economic Recovery Package. In my opinion based upon everything I’ve read and based upon the sound logic that fixing housing is the most important factor in fixing the economy, I think it is highly unlikely that Obama won’t enact a housing stimulus shortly after inauguration. If your buyers are worried that by buying now, they might not be eligible for any housing stimulus incentives announced on January 20th, here’s what I recommend they do: Include a contingency in the sales contract that says the buyers intend to capitalize on the housing incentives in the anticipated Economic Recovery Package and have the option to cancel this contract if: 1. A package is not passed prior to settlement or 2. If contracting prior to settlement somehow makes them ineligible for the incentives. To protect the seller, I would include a clause that says: In the event that the Buyer is not eligible for the housing incentives due to the contract being executed prior to the incentives being enacted, a new contract will be written between the Buyer and the Seller with the same price and terms of the existing contract and executed immediately after the housing incentives are enacted. Once the new contract is executed, the existing contract will be declared null and void. Anyway, you get the picture . . . the point is that there are ways to incorporate language into the contract that allows the Buyer to “Have their Cake and Eat it Too” by protecting the buyer in the event that they are not able to eligible for the housing stimulus incentives as a result of contracting prior to the incentives being implemented.
Remember, the main reason to buy now is so Buyer’s can negotiate a good deal for themselves at the point when Sellers are the most desperate. As I explained in my prior email, after the housing stimulus is announced, Seller’s won’t be willing to offer the types of deals they are now. The pressure will be off and the balance of power between Buyer and Seller will be somewhat restored.
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