California enacted its new $10,000 first-time homebuyer tax credit just in time to avoid the precipitous drop in first-time buyer traffic in May that hit the rest of the nation’s real estate markets, according to proprietary data from the Campbell/Inside Mortgage Finance Monthly Survey of Real Estate Market Conditions.
The National Association of Realtors reported today that sales of existing homes fell unexpectedly in May with the end of the $8,000 Federal first-time buyer tax credit April 30. Though sales fell only 2.2 percent from April, to an annual rate of 5.66 million units, analysts polled by Reuters expected May sales to rise 5.5 percent to a 6.12 million-unit pace from the previously reported 5.77 million units in April.
The Campbell survey found that first-timer traffic virtually disappeared nationally after April 30. The survey’s first-time homebuyer traffic index, which measures home shopping activity on a scale of 1 to 100, registered an anemic 35.1 in May. This was down from an index of 63.5 in April. Since September 2009, the index had never been below 50, which represents a flat, or neutral, condition in home purchase activity homebuyer traffic dropped sharply in May. This drop implies fewer signed contracts in June and fewer closed transactions in July and August.
However, in California the Campbell index fell from 63.1 to 49.4, a drop of 13.7 points, but still nearly 15 points above the national average.
NAR’s own practitioner survey found that first-time buyers purchased 46 percent of homes in May, down from 49 percent in April. Investors accounted for 14 percent of transactions in May compared with 15 percent in April; the remaining sales were to repeat buyers. All-cash sales were at 25 percent in May, edging down from a 26 percent share in April.
Campbell’s index is based on traffic, which suggests that sales in June and July will reflect the dramatic drop off in first-timer activity in May.