Bethany Swanson sits at a tiny kitchen table in her new, 550-square-foot home on Dakota Street in Missoula, a home she closed on in late September, just a couple months before the federal First-Time Homebuyer Credit was set to expire.
"It was the reason I bought my house," says Swanson, 31, of the $8,000 credit. "I wouldn't have done it—I wouldn't have been able to do it—otherwise. The tax credit is providing me the security cushion I need so that if anything does happen to my house, I can make sure that I can afford to fix it. Otherwise, I just don't have enough saved to feel comfortable."
Count Swanson among the many Missoulians who have taken advantage of the "credit"—it actually reduces a taxpayer's tax bill or increases his or her refund dollar for dollar—and, in turn, sparked a recent real estate market rebound.
According to the Missoula Organization of Realtors (MOR), 101 homes sold in Missoula County in November, up from just 41 in November 2008. The average number of days a home stayed on the market dropped from 157 to 123. Year-to-date, Missoula County sales stood at 1,062, one shy of 2008's total, but still well short of the high of 1,722 in 2006. The median home price has dropped from $217,500 in 2008 to $212,000 so far in 2009.
Local housing professionals say all of these trends are driven largely by the tax credit, which lawmakers last month expanded and extended until the middle of 2010.
"All of these November closings were probably people who were writing offers in September and October, and that was before the tax credit got extended, and before there was serious talk of a tax credit extension," explains MOR President-elect Brint Wahlberg of RE/MAX Realty Consultants. "I can speak from personal experience—with my November volume being up considerably as well—that we had a lot of people who wanted to take advantage of the tax credit."
Wahlberg adds that the Missoula numbers are in line with cities around the country.
"We've seen this nationally, too," he says. "It's what they call a bifurcated market, where you have certain segments that are really strong, and certain segments that are lagging a little bit. Missoula mirrors that national trend quite a bit, where the upper end price range—over $350,000, $400,000—is still lagging, but the first time homebuyer market...has helped stabilize our market considerably."
With the credit stabilizing the housing market, businesses that depend on the industry, like local lenders and title companies, are also seeing steadier numbers.
"I can say that the First Time Home-Buyer credit is being used frequently as I believe all the purchases I have had over the last few months are folks taking advantage of that, as well as investors with cash reserves snapping up rentals at low prices," says Julie Lapham of L&L Mortgage.
Vicki Corwin, vice president of Stewart Title in Missoula, says that out of all of the transactions her company has processed so far in 2009, three out of four have been first-time homebuyers.
"I'd say we're starting to see a little bit of a rebound right now," she says, "but not as much as I thought we would with the extension of the tax credits."
But it's been enough, Corwin says, to justify keeping on the staffers who were re-hired back in January to deal with the rush of refinances when interest rates dropped to their lowest levels in decades. Those are the same staffers who were let go in October 2008 during the depths of the housing market crash.
Economist Larry Swanson of the Center for the Rocky Mountain West calls the credit "hugely important." Combined with record-low mortgage rates and relatively soft prices, it's created a buyers' market.
"All things considered," Swanson says, "it's a very good time for first-time homebuyers to get into home ownership. The homes that people own are, for most families, their single largest source of wealth. So it's important for young families and young adults who can to get into home ownership. And if this can be done under relatively favorable terms, so much the better. And that's what we have now.
"This opportunity won't last forever," he continues. "Interest rates will in all likelihood begin to edge up as we move toward early spring and summer and as the national economy begins to show increasing signs of recovery."
Wahlberg expects Missoula will be on the leading edge of the recovery.
"I think as we proceed forward this winter and spring," he says, "it's probably going to be much like this fall has been—busy, lots of people looking, a little bit more demand than supply in a lot of cases. I fully expect that the first half of 2010 is going to be pretty fast and furious."
And no doubt that $8,000 check from the Internal Revenue Service will be spent just as fast and furiously by first-time homeowners. Bethany Swanson, for one, plans to buy new windows to replace the ones the December cold has all but frosted over, and put the rest of the money into an emergency fund.
"I never thought I'd be able to buy a house in Missoula with a single-income and working in the environmental nonprofit world," says Swanson, who works as the outreach manager for the Wild Rockies Field Institute and as an adjunct professor at the University of Montana. "I just assumed that that was an impossibility for me."