Realty Tours Northwest on Blogger: Yakima Area home sales likely to slow with expiration of tax credits

YAKIMA, Wash. -- A last-minute rush to qualify for federal home-buyer tax credits provided one last boost for Yakima County's housing market during the second quarter of this year.

But while real estate seems to be holding up relatively well amid a sluggish economy, local agents aren't sure record-low mortgage rates will be enough to keep people buying in coming months.

"The truth of the matter is, if they can't qualify for the loan, their options are extremely limited," said Chris Nass, an agent with Rose & Associates in Yakima and current president of the Yakima Association of Realtors.

Sales of existing homes in Yakima County during the second quarter increased 23.7 percent from the same period a year ago and 16.4 percent from the previous quarter, according to figures released Wednesday from the Washington Center for Real Estate Research at Washington State University.

All but one county in the state saw year-over-year increases during the second quarter, according to the center's data.

This time last year, the tax credit was just under way, so it is not a big surprise that most counties saw great improvement in sales from a year ago, said Glenn Crellin, executive director of the Washington Center for Real Estate Research.

The tax credits included one for $8,000 available to first-time homebuyers and a credit of up to $6,500 for repeat buyers, a move designed to spur more activity in the higher price ranges.

While the tax credits officially ended April 30, buyers who were under contract for a home by that date could still qualify for the tax credits if they closed on the home by June 30. That closing deadline has since been extended to Sept. 30.

As a result, sales activity from the tax credit continued into May and June, said Rick Fairbrook, broker and owner of John L. Scott Real Estate in Yakima.

Most of the uptick in sales was driven by first-time buyers hunting for homes priced under $200,000.

Jose Arellano, 24, purchased his first home in Union Gap in May.

He said that he would have purchased a home anyway -- he was tired of renting -- but the $8,000 tax credit was an extra incentive.

Combine that with a competitive price -- he paid just $45,000 for the two-bedroom, one-bathroom house -- and a decent, if not rock-bottom interest rate of 6.5 percent, made for an ideal opportunity to buy.

"The (tax credit) money went into renovation," said Arellano, a construction worker. "I ended up with a nice cheap home."

Real estate agents say the surge in home purchases in the lower price range is what drove down the county's median purchase price for existing homes. The median price during the second quarter was $152,700, a 3.7 percent decrease from the same period in 2009.

While that wasn't good news for sellers, Yakima County fared better than the state, which saw prices drop 6.9 percent.

And while sellers, in general, ended up getting less than their original listing price, the difference was not enough that they ended up losing money on the sales. The average purchase price so far in 2010 is $177,000, a few thousand dollars shy of the average listing price of $185,000, according to data from the Yakima Multiple Listing Service.

Home buying activity began to taper off in June, the final month of the quarter, Fairbrook said.

It's an indicator of what's expected during the third quarter, when the tax credit purchases will continue to taper off, and as long as unemployment remains high.

"I think a lot of trans-actions were moved up in the buyer's world to take advantage of that tax credit," said Nass of the Yakima Association of Realtors. "That will probably have an adverse effect on the market for the rest of the summer, if not the rest of the year."

The local real estate industry is now looking to record-low interest rates as the best selling point for potential buyers. There are reports of interest rates for a 30-year, fixed interest mortgage dropping to as low as 4.5 percent, a rate unheard of a few years ago.

"Tax credits are gone, but we have the lowest interest rates in 50 years," Fairbrook said. "That's one thing that we're trying to emphasize with our buyers and sellers."

But that selling point may be tough for those with less than perfect credit.

Agents are also hopeful that some positive national attention may prompt more activity.

Cable channel CNBC recently aired a segment in which Zillow.com, a Seattle-based firm that tracks home values nationwide, named the Yakima metropolitan area as one of the top 10 most stable real estate markets.

A year earlier, Zillow also listed Yakima as one of the top five best places to buy a home during a segment on "Good Morning America."

"Yakima is one of those places that escaped the bubble market," said Katie Curnutte, a Zillow spokes-woman. The area "didn't see the huge downturn."

Local agents don't think that positive reports of the market will necessarily be a cure-all, but may boost confidence in both potential buyers and sellers.

"If you just need that little push (to buy), it might get you off the fence," Nass said.

* Mai Hoang can be reached at 509-577-7685 or mhoang@yakimaherald.com.