The long and deep national recession had its start in the housing market, so signs that the market is stabilizing must be greeted as good news. The National Association of Realtors reports that in the third quarter of this year, the national median home price was $177,900, an increase of $7,000 from the second quarter. Still, that figure is more than 11 percent lower than the third quarter of 2008.
In addition to the growth in housing values, activity is up, with the NAR reporting the purchase of existing homes was up 9.4 percent in September. In Maine, sales were up 23 percent.
Financial experts are divided on how effective the first-time home buyer tax credit has been in stimulating the moribund economy. The $8,000 federal tax credit, in place for all of calendar 2008, has been extended through April of next year. A $6,500 tax credit, for those who have lived in their homes for at least five years and are buying a new home, is also available through April 2010.
“We can’t underestimate just how powerful a catalyst the first-time home buyer tax credit has been for the housing sector,” Lawrence Yun, the NAR’s chief economist, told CNN.com.
Maine officials would do well to pay especially close attention to the housing sector. Maine has a much higher home ownership rate than other states, yet it also has one of the oldest housing stocks in the country. Those two facts are not contradictory, but rather are related; older houses have served as affordable housing, but this is not a trend that should continue.
In addition, Maine’s state and local governments rely heavily on housing; much of state government’s sales tax revenue has come through the sale of construction materials, and local government relies on the real estate, or property tax.
With tax shortfalls, state government will continue to focus on what it can’t do, rather than what it can do, in the coming year. But if any new tax breaks for home ownership programs are considered, they ought to carry weight with lawmakers.
Nationally, Mr. Yun noted, “Most of the 75 million home owning families have more wealth tied to their homes [than to the stock market]. Home values could soon turn consistently positive and help the broad base of middle-class families, but we are not there yet,” he said. “We need a steady supply of qualified buyers to meaningfully bring inventories down and return us to a period of normal, steady price growth and to fully remove consumer fears, which would then revive the broader economy.”
Homeowners, whether first time or “step up” buyers, become locally based consumers. They patronize hardware, home improvement, garden and furniture stores, and they use services provided by painters, plumbers, electricians, carpenters and landscapers. And this is not to mention that they have children and become active in their communities, a social benefit.
“Without a firm foundation for middle-class wealth recovery, the post-recession economic growth likely will be one of the weakest in U.S. history,” Mr. Yun said. Easing homeownership must be part of the plan.