David Rosenberg, Chief Economist at Canada's Gluskin-Sheff, reported this morning as follows:
We heard from Ivy Zelman (top-rated real estate research) on Friday that the bill that included an extension for the closing date of the homebuyer tax credit fell two votes short of passing in the Senate. This virtually assures that it will not become law prior to the June 30th deadline. Ivy says that while it is difficult to quantify the impact, the fact that as of yet there is no extension, which was widely expected in this bailout nation, it could trigger a jump in cancellations beginning in July if a sizeable number of sales are not closed in time. From the numbers we have been able to glean, up to 180,000 buyers who were expecting to close their deals by June 30th and get the tax credit are now going to miss the deadline.
Of course, not all contracts that miss the closing deadline to qualify for the tax credit will be cancelled. And the impact on housing market data will depend on the distribution between new home sales and existing home sales. If most are existing homes, the total sales for the year will be reduced by less than 2% for every 100,000 cancelled sales. New home sales for 2010, on the other hand, will be reduced by approximately 15-20% for every 100,000 cancelled sales.
What will be most impactful about a flurry of cancelled sales in July is that it will coincide with what is expected to be a particularly weak time for home sales following the end of the closing period for the spring home purchase tax credit programs.
Disclosure: No positions.