Home sales nationwide jumped an impressive 9.4 percent in September as buyers took advantage of the first-time buyer tax credit and low mortgage interest rates. Although sales activity is at the highest level in over two years, Lawrence Yun, National Association of REALTORS® chief economist, explained that a self-sustaining recovery is still a few quarters away and an extension of the tax credit will help that goal. As we await Congress’ decision, many wonder what will happen to home sales if the tax credit is not extended.

Ken Snyder blogs about why his local market may not be getting a boost from the first-time buyer tax credit:

“Sales activity is at the highest level in over two years, since it hit 5.73 million in July 2007.  The rise in sales is generally attributed to several factors, namely the first-time buyer’s tax credit, rock bottom prices driven by foreclosure sales, and continued record low interest rates.  Combined, these factors have driven the percentage of first-time buyers to an all-time high.  But I think the reasons we see less of a sales rise in the Northeast in general are exactly the same one causing sales to rise more in other areas.  Let me explain.

The first-time buyer tax credit has been a huge driver in many parts of the country.  However, in the Back Bay and South End for example, where one bedroom ’starter’ condos easily cost $400,000 and up, the annual income needed to purchase a ‘first-time buyer’ home exceeds the income cap on the first-time buyer credit. So we see less of an impact from that program in our most expensive neighborhoods because most buyers make too much money to qualify for it.”

If the first-time buyer tax credit is not extended, the fear is the current momentum will not carry into next year. While the tax credit definitely has a postitive effect on the market, Snyder’s local data shows that buyers are still willing to purchase a home even without the incentive.

Click through to read Ken Snyder’s full blog.

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