The general consensus is that the home-buyer tax credit did its job in stoking spring sales. The question now that the program is over is whether the real estate market will be back in the doldrums after what many have considered to be a contrived boost of demand. The federal program – an attempt to jumpstart the staggering housing market – requires first-time home buyers to have signed a valid contract by April 30 and close the transaction by June 30 in order to qualify for the federal tax credit worth up to $8,000. The credit also benefits certain current homeowners who could qualify for up to $6,500. “It definitely created a stimulus in the marketplace and incentivized buyers to purchase,” said Patti Petralia, President of the Southland Regional Association of Realtors. “But we are expecting to see a sales drop-off.” According to the association, April sales were up 8.4 percent over the total reported in March in the San Fernando Valley. May figures were not yet available for the Valley area, however real estate research firm DataQuick reported June 15, that the number of houses and condos that closed escrow in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties increased 9.7 percent in May from the previous month. May sales were the highest for that month since May 2006, according to the report. Data Quick figures only account for contracts that have already closed so it’s likely the surge reflects a wave of buyers who signed contracts in April and were rushing to finalize the deals in time for the June 30th deadline. Real estate experts including Petralia agree that now that the April 30 window to sign a contract has passed, home sales are headed for a slump in the coming months. National market figures are already showing signs of the anticipated draw-back. National index The National Association of Home Builders/Wells Fargo Housing Market Index slid five points, to 17, in June from May, the NAHB reported June 16. This was the index’s steepest monthly drop since November 2008. The Index, a leading indicator when measuring the national real estate climate, gauges builder perceptions of current single-family home sales and sales expectations for the next six months. The survey also asks builders to rate traffic of prospective buyers. “We expected some softening in the market following the expiration of the home buyer tax credit and this report seems to verify this assumption,” said NAHB Chief Economist David Crowe in a statement. “In the coming months, an improving economy, rising employment, low mortgage rates and stabilizing home values should help the housing market move forward. But as today’s HMI data shows, builders still remain very cautious and are aware that several factors could impede the nascent housing recovery, including serious problems in obtaining financing for the production of housing, faulty appraisal practices and competition from short sales and foreclosed properties.” Locally, there’s now a relative quiet in the halls and offices of real estate firms in the Valley according to Petralia, who works as a realtor for Re/Max Olson & Associates in Porter Ranch. This, she said, contrasts with the last- minute home-buying rush that took place in April. “It’s very quiet now,” she said. State credit However, California’s First-Time Buyer Credit, which allows up to $10,000 for first-time homebuyers who sign a contract on a new home after May 1, 2010 and close escrow before Jan. 1 2011, might help offset the loss of the federal credit, and continue to fuel recovery, she said. The California tax credits are quickly running out. Already some 12,740 applications have been received and nearly $66 million of the $100 million allotment for the tax credit has been used up. Overall, the local housing market is seeing some strength, she added. Brad Blackwell, National Sales Manager for Wells Fargo Home Mortgage Division, is also confident the California real estate market is coming out of the recession. “While we may see a dip in May and June contracts because people may have bought earlier than they would have normally in order to take advantage of the tax credit, we are seeing strength in the California real estate market,” he said. REOs absorbed Blackwell said there’s good demand for properties and REOs are getting absorbed well without sitting in the market for too long. While the home buyer tax credit was one important component, other factors contributing to the recovery include the fact that interest rates have remained near historic lows and prices have come down, he added. Wells Fargo – the number one home mortgage originator in the country- saw a good surge of home buyers taking advantage of the tax credit, said Blackwell. Now like other financial institutions Wells Fargo “is putting all hands on deck” in an effort to process the higher number of mortgages before the June 30 deadline. “The bank has identified in it’s processing pipeline all those people whose purchase loans came in prior to May first, and is prioritizing those,” he said. “We’re using all our processing and underwriting resources, we’ve brought in resources from other divisions, and everyone is working over time. Right now we are in good shape to get them all done.” A proposal has already been introduced in Congress to extend the deadline to Sept. 30 in order to give lenders more time to process the high volume of applications. One worry has been that short sales won’t receive the required bank approvals in time to meet the closing deadline. According to the National Association of Realtors, as many as 180,000 people who signed a contract by April 30 would not be able to meet the closing deadline of June 30. “It’s very difficult to get short sales processed in a reasonable amount of time. It’s a very lengthy, arduous task. At minimum it takes four months to get a short sale through,” said Petralia, who supports the extension of the deadline.