A new report that shows a large drop in home and condominium listings in the nation's biggest metropolitan areas is fueling speculation the housing market could be on the cusp of a positive trend for the new year.
The survey, conducted by Zip Realty, found that the number of condo and single-family homes listed in 27 major markets dropped in November -- down 28 percent compared to the same time last year.
The biggest drops were made in the western United States, where listings in several major cities in California are down to more than half what they were last November. In Las Vegas, a city hit especially hard by the housing bubble, the number of home listings is down 50 percent.
The drop in listings is welcomed news because it means people are buying homes. The change in the market also means those trying to sell houses are not facing the same challenging conditions as last year.
The decrease in housing supply can be traced directly to the Obama administration's first-time homebuyer tax credit. That credit was originally set to expire at the end of November 2009 so a lot of people rushed to buy a house before it was too late.
As of September, the IRS estimated that the program has helped 1.4 million tax-payers and the National Association of Realtors estimated that 350,000 homes have been sold as a direct result of the program. On Nov. 6 President Barack Obama extended the program through the end of April, 2010.
Beyond the extension, the tax credit program also expanded an additional credit to repeat home buyers.
For homes purchased after Nov. 6, home buyers are eligible for a tax credit of 10 percent of the sale price -- up to $6,500 for the purchase of a house.
But the program is not without stipulations. First, repeat buyers must have lived in their current home for at least five consecutive years of the last eight and the new home cannot be more than $800,000. The new home sale must occur by June 30, 2010, but a binding sales contract must be in force by April 30, 2010. The buyer must also make $125,000 or less and a married couple cannot make more than $225,000.
As the demand for homes increases, the market has also seen the return of the house-flipper.
There has been a huge rise in the U.S. during the housing down-turn. As of the end of September, more than 14 percent of homeowners were either in foreclosure or were at least one payment past due. Barclay's Capital estimates that there are nearly 639,000 foreclosed homes for sale -- nearly 10 percent of the total market.
With so many foreclosed homes on the market, banks are realizing that it is much harder to sell these foreclosed homes at auction now. They used to set the minimum price equal to the mortgage balance that was still owed, but many banks cannot even get this amount anymore. So they set the prices below the minimum, making them a steal for house bargain hunters.
But not everyone should rush out start flipping homes. The foreclosure auctions should only be done by very experienced buyers who understand housing and the local area really well. At these auctions you have to make quick purchase decisions about homes that cost hundreds of thousands of dollars and you cannot see the homes before you purchase them. There could be damages or structural problems that the new owner would have to repair.