Home sales rise to highest level since February '07

Due in large part to the old deadline for the first-time home buyer credit. Before the credit was extended to April 30th, 2010, buyers were rushing to close on their first home by November 30th, 2009. Naturally, this caused October home sales to rise drastically.

A few weeks ago, President Obama signed an extension to the $8k credit into law. In addition, there is a new credit for current homeowners so they can get $6500 if they buy a new home. For both credits, you must have a new home under contract by April 30th. The rules of the credits allow until June 30th for those contracts to finalize financing and close the transaction.

I am not alone in thinking that the extension and expansion of the home buyer tax credits will bring the typical spring buying season a little bit earlier than usual.

Read the full article here.

Tax credit extended and expanded...here are the details

Last Friday, President Obama signed the Tax Credit Expansion into law. This extends the first-time buyer tax credit and creates a new tax credit for current homeowners who buy a new house.

This is a really big deal - Just ask any first-time buyer who has been trying to make the old deadline!

The tax credit extension coupled with low interest rates, creates a prime opportunity to buy your first home, move up to fit your growing family or downsize while the government helps you!

Below is a summary of the new modifications in the extension and expansion of the tax credit:

• The $8,000 tax credit will be extended and available for first-time buyers through April 30th, 2010.
• Prospective purchasers with written contracts in place as of April 30th, 2010 will have until July 1st, 2010 to close the transaction.
• A NEW $6,500 tax credit will be available for current homeowners. To qualify for this provision, you must have used the home being sold as a principal residence consecutively for 5 of the previous 8 years.
• Income limits are expanded to $125,000 on a single return and $225,000 on a joint return.
• The limitation on the cost of the purchased home is $800,000.
  

Here are some really great websites that provide more information and answer situational questions:

• www.federalhousingtaxcredit.com
• www.wahomeowners.com

Extending home buyer credit gaining major steam

Reports this morning are suggesting the Senate has agreed to pass some form of an extension on the $8k home buyer tax credit. In fact, they are also talking about expanding the benefit to select move-up buyers that have owned their current home for at least 5 years. To clarify, nothing is official yet...but it is exciting news nonetheless.

Here are a couple links to the story:

Article on msnbc.com

Article on cnn.com

Should $8k tax credit be extended?

Update: Here's a new article from the Seattle Times that discusses the same $8k credit topic written about in the below blog post. Check it out.

This is the question of the moment. At least in real estate circles it is. The theory behind extending it and possibly expanding it is that the credit will continue to stimulate the housing recovery. On the other hand, it will obviously cost a lot of tax payer's money.

As a Realtor, I am definitely in favor of extending AND expanding the tax credit. On the ground, I see signs of market improvement and increased sales activity. However, we are not out of the proverbial woods quite yet. Perhaps allowing our politicians to spend at this rate will bite us later...and that's where I think I'm a bit shortsighted.

But in just speaking about what will help our housing market...I say give $15k to ANY home buyer for the next year. Now that's true stimulus.

Here's an interesting take on the impacts of extending or discontinuing the tax credit.

Crunch time for 1st-time buyers...

We've reached the midway point in September and any potential 1st-time home buyer must get a home under contract soon or risk the possibility of not qualifying for the $8k tax credit. Average time to close a home from accepted offer to closing the transaction is about 45 days. Making an offer today and not experiencing any bumps in the road would mean closing at the end of October. Since today's lending market is the equivalent of a gravel forest service road, buyers are almost certainly going to experience at least a few minor bumps or delays. It's imperative to give yourself a cushion to close before 11/30/09.

Here's a Seattle Times article that discusses the countdown toward the deadline.

Extend and expand the 1st time buyer credit?

Rumblings about a possible extension on the 1st-time buyer tax credit have been growing lately. Let's hope the government abides by the old philosophy of, "If it ain't broke, don't fix it."

Unless of course they want to give all buyers even more money!

Here's a recent article from the Seattle Times about efforts to extend the credit and even raise the dollar amount.

More on the tax credit for home buyers 2009

First-time home buyers who purchase homes from the start of the year until the end of November 2009 may be eligible for the lower of an $8,000 or 10% of the value of the home tax credit. Remember a tax credit is very different than a tax deduction--a tax credit is equivalent to money in your hand, as opposed to a tax deduction which only reduces your taxable income. The tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. Buyers will have to repay the credit if they sell their homes within three years.

Tax Credit vs. Tax Deduction

It's important to remember that the $8,000 tax credit is just that...a tax credit. The benefit of a tax credit is that it's a dollar-for-dollar tax reduction, rather than a reduciton in a tax liability that would only save your $1,000 to $1,500 when all was said and done. So, if a homebuyer were to owe $8,000 in income taxes and would qualify for the $8,000 tax credit, they would owe nothing.

Phaseout Examples

According to the plan, the tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000.

To break down what this phaseout means to home buyers who are over those amounts, the National Association of Homebuilders (NAHB) offers the following examples:

Example 1: Assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000 and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.

Example 2: Assume that an individual home buyer has a modified adjusted gross income of $88,000. The buyer's income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.

Remember, these are general examples. You should always consult your tax advisor for information relating to your specific circumstances.

Homes that Qualify

The tax credit is applicable to any home that will be used as a principal residence. Based on that guideline, qualifying homes include single-family detached homes, as well as attached homes such as townhouses and condominiums. In addition, manufactured or homes and houseboats used for principal residence also qualify.

$8,000 First-time Home Buyer Tax Credit

Last year the government passed a first-time home buyer tax credit that allowed eligible participants to receive $7,500. The big catch was that this had to be paid back at 0% interest over 15 years. The 2009 version of this tax credit is much improved and should cause many buyers to jump off the fence prior to November. Who wouldn't want $8,000 to pay down their loan or furnish their new place with furniture? This should be a big incentive to Seattle home buyers who are already enjoying lower prices and interest rates! Below are the basics of how the tax credit works.

• Effective dates: applies to purchases from January 2009-November 2009


• Tax Credit available up to $8,000 for first-time home buyers only.


• A first-time home buyer is a buyer who has not owned a home during the last 3 years. (Joint purchase applies to both parties)


• Eligible Property: Any residence that will be used as a principal residence. (Including single family, attached townhouses, condos, manufactured homes and houseboats) No second homes or investment properties.


• Income Limits: Adjusted gross income for single filers with incomes below $75,000 and couples with incomes below $150,000.


• Estimated partial credit for single filers with income up to $90,000 and couples up to $170,000. This is a general example. Please consult a tax advisor for stipulations on the partial credit.


• Tax Credit vs. Tax Deduction: the true benefit is a dollar for dollar tax reduction, rather than a reduction in liability. If you owe $8,000 in income taxes and you qualify for the tax credit, you owe nothing.


• Tax credit only needs to be repaid if home sold within the first 3 years.


• Purchases closed in 2008 will not be eligible for the 2009 revision of this tax credit.

Take advantage of the $8,000 tax credit today!

More on the home buyer tax credit...

Well, it appears that in the negotiations to find middle ground between the bill that the House passed and the one the Senate passed...the $15k deal proposed by the Senate was wiped out. Of course, nothing is official until President Obama signs the package into law. But this isn't the best news for home buyers or for people like me in the real estate world. It appears the credit was eliminated to lower the overall cost of the stimulus package and perhaps put more focus on creating jobs. $15k or no $15k, people can't buy houses if they don't have a job!

There is a slight silver lining however. It seems as though the Senate and House agreed to make the current $7500 first-time home buyer tax credit permanent...meaning, a person can keep the money vs. pay it back as current law now requires. It also looks as if it might be bumped up to $8000. This could have a direct effect on Seattle real estate as it seems a lot of younger buyers are waiting out the "unknown."

In the end, I just hope the stimulus works for our country even if it doesn't have an immediate impact on the housing market. Roughly $8k will still be great for any Seattle home buyer making their first purchase...or their first purchase in 3yrs. Free money is free money!

Again, nothing is official yet. So I will have a full explanation of the bill as it relates to real estate as soon as I can.

$15,000 home buyer credit?

It's not official law quite yet but the Senate took a bold step yesterday to truly stimulate the real estate market. They approved an amendment to the upcoming stimulus package that would essentially give $15,000 to anyone who buys a home in 2009. This money would come in the form of a tax credit and will not have to be paid back! The provision states that a home buyer can receive 10% of the price of their purchase up to $15k. Home prices in Seattle essentially dictate that most buyers will qualify for the full amount. If you owe money on your 2009 taxes, the amount you owe would be taken out of the $15k. This is great news for our markets, economy and any buyers sitting on the fence.

If you've been waiting for prices to drop or interest rates to drop, $15,000 should be enough reason to make you buy now while both rates and prices are low! The longer a person waits, the more buyers will enter the market to cash in on their tax credit. This will have a stimulating effect on the market and cause prices to level out or rise in some micro-markets.

Read the NY Times article explaining the tax credit.