Over the next few months you will read a lot about the money home buyers will save because of recently renewed and expanded federal tax credits.

What you probably won't read much about is a less obvious advantage these breaks may provide some smart home sellers. Financially, this sellers' advantage could prove quite substantial for those who get their homes on the market early during the  tax break period, which started Friday and essentially ends April 30, 2010.

Let me explain:

There is a common misconception that homes sell poorly during the fall and winter.  Indeed, it is true that most markets see fewer buyers and sellers during the cooler months and, thus, fewer transactions.

But, a decline in the number of transactions does not, in itself, imply a bad time to sell.  In some cases, quite the opposite can be true.

If the number of desirable homes falls faster than the number of buyers searching for homes, then, according to the law of supply and demand you may have learned in an Economics class, we would expect upward pressure on prices during the "slow months."

In reality, cold month pricing pressures vary from location to location.

In Boulder City, for example, an analysis of the years between 2004 and 2008 indicates a tendency toward higher median prices for existing homes during the cooler months.

Boulder City median home prices in December ($546,300), October ($544,800), November ($532,240) and January ($532,200) were on average the highest of the year.  July ($531,800) and August ($529,100) were next.

Similar sales figures for Louisville and Lafayette, two other Boulder County communities, showed little selling price bias toward any single time of the year. If anything, prices appeared slightly better in spring and summer months.

Figures were compiled using data from the Boulder Area Realtors® Association and the IRES multiple listing service.

So, how will new tax credit legislation affect the sellers' market in Boulder County?

The extension of the $8,000 tax credit for first-time home buyers will probably result in little change.  This is merely a continuation of an existing program that has so far had a relatively small impact on the area. Boulder County homes tend to be a tad pricey for first-time buyers. Sales of small condos and townhomes probably are seeing some improvments due to this tax credit.

But, the measure passed this week includes a $6,500 home purchase tax credit for home owners who lived in their current homes as principal residences for five of the last eight years. 

This provision probably will encourage additional buyers to enter the Boulder County market during the late fall and winter.  The bill signed by President Obama allows a maximum purchase price of $800,000, which should buy a very nice Boulder County home for people who relocate to the area or current residents who desire larger or smaller dwellings.

In other words, this provision should stimulate noticeably more demand in the Boulder region.

With supply down on a seasonal basis and demand artificially higher, we could see significant upward price pressure between now and April 30 when homes must be under contract to qualify for the tax credit.

As a result, homeowners who planned to market homes during the traditional spring/summer buying season should consider getting their dwellings spruced up and on the market as soon as they can.  It is entirely possible the best period to sell during 2010 will end May 1.

(A note to home buyers:  the new law has some limitations concerning home price, personal and household income, purchase dates and closing dates.  You should talk to your tax expert before agreeing to any residential deal for which you expect to take the tax credit. For more information, click here.)


(Ron Rovtar is a broker associate at Prudential Real Estate of the Rockies in Boulder.  He can be reached at 303.473.1926)



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