The first-time homebuyer tax credit has heated up the Tri-City housing market.
The federal credit probably helped sell more than 1,700 homes in the $200,000 and under price range in the last year, out of a total of 2,662 homes sold during that time, said Paul Roy, vice president of the Tri-City Association of Realtors and a Coldwell Banker Tomlinson broker.
"The tax credit helped build consumer confidence," he said.
And that potential $8,000 credit, which had been set to expire Nov. 30, was recently extended to cover homes contracted before April 30 and closed by June 30.
The new law also allows people with higher incomes to qualify, and provides a credit of up to $6,500 to longtime homeowners to buy a replacement home.
The tax credit, together with low interest rates for mortgages, should boost the Tri-City housing market, Roy said. He expects potential homebuyers who have had a "wait and see" attitude to act now.
Christina Robinson, 20, is looking for a fixer-upper, preferably in Kennewick. She said the tax credit was a big factor in her decision to buy.
"The tax credit makes me comfortable," said Robinson who's looking to spend $100,000 for a home. She's already been approved for a loan at a 5 percent interest rate from Golf Savings Bank.
The first-time buyers credit also helped Tristan Crandlemire, 27, make up his mind about getting a new home for his family. He's a sales rep for Sherwin-Williams.
Crandlemire said he looked at existing homes on the market and almost gave up. Then he found a builder offering a home similar in design to what he had in mind and at a price he could afford.
For about $180,000, Trinity Homes is building the Crandlemire family a 1,432-square-foot, four-bedroom home overlooking Columbia Park Trail in Richland. It'll be completed in about two weeks.
"Words can't describe the excitement of becoming a homeowner: It's the top 10 of your life," said Crandlemire, who also convinced a neighbor at his rental duplex in Kennewick to buy a home near his house.
The rush of first-time homebuyers is keeping builders, real estate agents and loan officers busy in the Tri-Cities.
But no one's complaining, said Jeff Thompson, co-owner of Windermere Real Estate Tri-Cities. And he said the new offer of a credit to existing homeowners or move-up buyers also will generate new sales.
Thompson also believes that demand will result in more homes built, which would expand the inventory of available affordable homes, which lately has become thin. "We are used to having at least 1,500 homes on the market," he said.
Roy said there are only about 1,048 homes on the market, enough inventory to last 4.7 months. Of the listed homes, 247 are in the $150,000 and under price range, and are expected to last for 2.9 months. The 235 homes that cost $150,000 to $200,000 are enough inventory for just under 4 months, he said.
A six-month supply of homes is considered a "normal" market, according to real estate industry standards, and when inventory falls below that it's considered a sellers' market.
Similarly, a housing inventory exceeding six months is considered a buyers' market. Roy said homes priced at $300,000 and up fall in that category.
Jeff Losey, executive director of the Home Builders Association of Tri-Cities, said new construction is building up the home supply, but many of those homes are pre-sold. With lenders tightening credit, builders are building fewer homes on speculation, he said.
That's why the number of building permits issued for single-family homes from January through October was 1,047, down 23 compared with the same period last year, Losey said.
But while there are fewer $400,000-and-up "spec" homes being built, spec homes being built in the up-to-$150,000 price range increased over last year, Losey said. The number has stayed at almost the same level for spec homes up to $250,000, he said.
While higher-end homes are not selling as fast, Windermere's Thompson says he believes the tax credit will spur "move-up" buyers and increase demand for homes up to $350,000. Losey echoed that, saying "move-up" buyers typically prefer custom-built homes.
Bill Walther, a loan officer with AmeriChoice Home Loans in Richland, said he's seeing a rush of first-time buyers. Last month, 574 new home loans were made in the Tri-Cities, compared with 416 home loans in October 2008, he said. The market seems to have picked up since July, he said.
Walther said first-time homebuyers often are a young married couple with decent jobs. He said the area's competitively priced homes and financing programs fit their needs.
Eric Pearson, president and CEO of Community First Bank, also has seen an uptick in loans to first-time homebuyers. He said the average size of a home loan made by his bank is about $160,000. The bank also is providing spec homes financing to a few "core-customer builders."
Kyle Pfundheller, owner of Trinity Homes, is one of those offering spec homes, which he said are about 75 percent of his business. He just started building his 11th home this year.
Houses built by Trinity cost $180,000 to $230,000 and are a notch above entry level, said Pfundheller, who started his company in 2006.
Pfundheller said he still needs to sell eight of his homes, but he is optimistic because the Tri-Cities wasn't hit as hard economically as some other communities.
Randy Wacker, assistant vice president of real estate lending at Gesa Credit Union, is also optimistic. He said Gesa is doing a lot of new homebuyer loans instead of refinancings, with the average loan about $165,000.
"We find the Tri-Cities market very solid and steady," he said.
-- For more information, go to www.irs.gov and search for First-Time Homebuyer Credit, or go to www.realtor.org.
-- Pratik Joshi: 582-1541; firstname.lastname@example.org; Business Beat blog at www.tricityherald.com