April 30th, 2010 8:43 AM by Lehel S.
An $8,000 federal homebuyer tax credit ends Friday, after months of helping fuel sales among first-time customers.
But despite concerns that the buyer frenzy will diminish as the credit goes away, Realtors and observers say the market will continue strengthening and prices will rise.
That increase is partly why the end of the federal tax credit is unlikely to delay home purchases among Americans who feel now is the time to buy, according to Prudential Real Estate and Relocation Services Inc.
According to the survey, low interest rates and the expectation that rates and housing prices will rise were more important than the tax credit in prompting a purchase.
Of those surveyed, 61 percent cited low mortgage interest rates as "very important" to their decisions - higher than the tax credit or cheap prices. In contrast, 65 percent believe that the end of the tax credits will have little or no effect on their pursuit of a home.
"We didn't see (prices) getting any lower," said Rudy Quinonez, who with his wife Melanie recently bought a condo in Claremont. "From what I read, the market kind of bottomed out. So, it was kind of the right time. Looking around, the prices were lower than we'd expected. But it kind of bottomed out. So we said, `Do we wait?' We didn't think they would lower any more, if any."
That's not to say the tax credits didn't play a role in reviving a market crushed under the weight of defaulted subprime loans.
More than 90 percent of consumers, according to the Prudential survey, believe the credits have helped first-time homebuyers and the U.S. housing market in general.
Many local Realtors said the credits helped move a lot of buyers off the fence to pursue a first home.
San Gabriel Realtor Kathleen Mueller said the credits were responsible for much of her customers' decisions to stop simply "toying" with the idea and go for a home.
Quinonez said the credit ultimately played a role in the couple's decision to buy.
"We'd had a baby, and we'd been entertaining the thought," Quinonez said. "(The credit) was just an incentive to buy now rather than later ... otherwise we probably would have waited a little longer."
The California Association of Realtors has repeatedly pointed to the credits as fuel for the market. And industry lobbyists have pushed leaders on Capitol Hill to extend the credit once again. It was unclear Wednesday if that would happen, but lawmakers instead seemed to be emphasizing ways to create jobs as a way to drive the home market.
"A significant component of the housing market crisis is a jobs crisis, and that must be the top priority moving forward," said Rep. David Dreier, R-San Dimas. "I believe our focus must be on creating jobs in order to help get the economy back on track."
Last month, Gov. Arnold Schwarzenegger signed a bill that will award $10,000 income tax credits to people who buy a home starting May 1.
But even as demand increases and prices have risen, some local Realtors worry about a scenario similar to cash-for-clunkers.
That program boosted demand for cars. But when it ended, the demand shut down.
Still, even CAR's own president said last month in a press release that while the loss of the federal credits would remove some urgency from the market, it's "not likely to derail current market trends."
"Maybe it's wishful thinking," Mueller said. "But I don't think demand will stop."