Bounce from tax credit could last past the deadline

While the first-time homebuyer tax credit program is set to expire April 30, it could end up affecting housing statistics for weeks to come. That’s because homebuyers have until June to close on properties if they sign contracts by next Friday.

The program, extended from last fall, offers $8,000 to first-time buyers and $6,500 to repeat buyers.

The credit could result in a continued, artificial rise in the rate of mortgage application filings, which showed a 13.6 percent uptick for the week ending April 16 according to seasonally adjusted week-over-week data released today from the Mortgage Bankers Association. The average 30-year mortgage rate, meanwhile, dipped to 5.07 percent from 5.17 percent, according to the MBA’s report.

Michael Fratantoni, vice president of research and economics with the MBA, told The Real Deal that while this week’s uptick in mortgage application volume can be attributed to a confluence of factors — including a dip in mortgage rates and the end of the Easter holiday — the homebuyer tax credit likely influenced figures.

And this uptick could continue through the spring, Fratantoni said.

“[We forecast] something of an increase in the second quarter but we’re going to be paying back for that in the third quarter,” Fratantoni said of mortgage application volume. “The time between when a borrower files the application and [a] home sale occurs is about four to six weeks.”

As for the New York City market, Noah Rosenblatt, a market analyst and founder of UrbanDigs, said that “there is a sense of urgency” right now that will be reflected in the data in the tax credit’s wake.

“Clearly you [have] some pent-up demand,” Rosenblatt said, noting that people’s optimistic attitude toward the New York market could push mortgage apps up through the spring.

In South Florida, Rosenblatt argued that the time to make a home purchase was in December, when area rates were at historic lows. He suspects the trend leading up to the tax credit’s expiration will be similar in Miami and New York. 

He said people should keep in mind that an “artificial, weak foundation led to the improved [mortgage] data.”

But the tax credit’s expiration this time around is likely to have a less dramatic effect nationwide than it did in the fall, when buyers flocked to the market to make the deadline, according to the MBA’s Fratantoni.

While he sees a “greater volatility” in mortgage rates through the summer, Fratantoni said he expects the mortgage market to withstand the withdrawal of the federal support programs.

“I think it is a natural progression… to more of a typical environment,” Fratantoni said. “The economic recovery has taken hold now; we’re seeing improvements.”