Does the report that Boise real estate sales jumped in March mean that the market is improving quickly?
Anyone who stays aware of the Boise real estate market and hopes for it’s improvement has heard about the jump in sales in March of 6.8%. This should not be a surprise to anyone because of several factors that are pushed to the back page in an attempt to report an optimistic slant.
With the First Time Home Buyer Tax Credit or FTHBTC looking like it is not going to be extended by the federal government, many homebuyers have been pushed to rush out and contract a home before the deadline. The rules on the FTHBTC say that a buyer must have the home they are planning on claiming in the credit in contract before the 30th of April, and the closing finalized before the end of June. With these deadlines in place the latent rush in the market is predictable.
The real question to me is what is the solution for July? How will the real estate market behave once homeowners do not have the FTHBTC to “help” them purchase their home, or at least encourage them. Many industry insiders cite some optimism for the Boise real estate market, and the national one as well, in that rates and financing costs are presently low. But, what will happen when those rates and costs go back up? The Federal Reserve, which sets the interest rates for banks, has already hinted at raising the rates this summer to control inflation. If rates rise and the tax credit disappears, what, other than price, will stimulate buyers to purchase homes?
Many Boise real estate agents are sanguine about the future of the housing market in the short term, with the passing of two important market factors. When you add in that unemployment is one of the most chilling factors in the real estate market today, you can see why.
With many homeowners simply trying to hang on to their homes, unemployment distorts the rates of defaults if they cannot. When the employment numbers were lower more homeowners could afford to keep their homes, even if they owed more than the homes were worth. As long as they could make their payments, and couldn’t really rent for what they were a dramatic difference then what they were making their payments for, most were perfectly content to keep paying. Once rent rates dropped a bit and home values declined as well, the numbers came out in favor of paying reduced rent, and releasing the albatross around their neck that home has become.
The recovery of the Boise real estate market is really dependent one on very substantial factor; jobs. If area residents cannot find gainful employment, they simply cannot keep their homes, regardless of how many programs the federal government creates. Likewise, if they cannot pay for a mortgage payment and prove they have the income to do so, no bank on earth will loan them money to buy. A comprehensive solution to the jobs crisis has to be presented before any foreseeable resolution to the real estate crisis emerges.