Home Buyer Credit Gets New Life

Senate negotiators reached a tentative deal to extend a tax credit for first-time home buyers, but its passage remains uncertain.

The agreement would extend the existing credit for first-time home buyers, worth up to $8,000, while offering a new credit of up to $6,500 for some existing homeowners, Senate aides said. The reduced credit would be available to all home buyers who have been in their current residence for a consecutive five-year period in the past eight years.

The new provisions are aimed at broadening availability of the credit beyond first-time buyers and giving the weakened real-estate market a bigger boost while preventing real-estate investors from benefiting.

Many property experts have cited the credit as a reason for signs of recovery in the housing market in recent months. But that recovery was somewhat undercut by the September drop in new-home sales reported Wednesday.

The credit would be extended from its current expiration date of Dec. 1 to all contracts entered into by April 30, and closed before July 1. It is expected that income limits on people claiming the credit would be increased to $125,000 for singles and $250,000 for couples, from the current $75,000 and $150,000, aides said. The credit phases out for people making more than those amounts.

.While Senate lawmakers appear to have reached a deal on the substance of the tax credit, they are still at odds over how it would be brought to the Senate floor. Senate Majority Leader Harry Reid (D., Nev.) hopes to add it to a bill currently on the Senate floor to extend federal unemployment insurance benefits. But agreement on that hasn’t been finalized.

While Senate Republicans are likely to support the measure, House Democrats have raised concerns that it carries a high cost to the government. The Internal Revenue Service is examining the program for alleged abuse.

Source: Wall Street Journal, COREY BOLES and JOHN D. MCKINNON (10/29/09)


Senate Dems on Board with Credit Extension

Senate Banking Committee Chairman Chris Dodd (D-Conn.) says Senate Democrats have agreed to extend the first-time home buyer tax credit. The latest version extends the program to home sales signed — not closed — by April 30. Purchasers would have another 60 days to close the sale. The credit will also be expanded to include so-called step-up buyers who have lived in their current home for at least five years. The credit would be cut nearly 10 percent to a $7,290 cap. Income eligibility for first-time home buyers would stay the same, but it would rise for step-up buyers to $125,000 for individuals and $250,000 for couples.

Source: Bloomberg News, Dawn Kopecki and Ryan Donmoyer (10/27/2009)

Why Sales Jumped 9.4 Percent

According to the National Association of Realtors, existing-home sales have made a strong rebound in September with first-time home buyers driving much of the activity, marking five gains in the past six months.

Existing –homes sales which include single-family, townhomes, condominiums, and co-ops lead the charge jumping 9.4 percent. Sales activity in this sector is at the highest level in more than two years, since July 2007.

National Association of Realtors chief economist, Lawrence Yun, said “favorable conditions matched with a tax credit are boosting home sales. Much of the momentum is from people responding to the first-time buyer tax credit, which is freeing many sellers to make a trade and buy another home,” he said. “We are hopeful the tax credit will be extended and possibly expanded to more buyers, at least through the middle of next year, because the rising sales momentum needs to continue for a few additional quarters until we reach a point of a self-sustaining recovery.”

Even with the improvement, Yun said the market is underperforming. “Despite spectacular gains in the stock market, principally from the financial sector recovery, most of the 75 million home-owning families have more wealth tied to their homes. Home values could soon turn consistently positive and help the broad base of middle-class families, but we are not there yet,” he said.

Why the need to continue and expand the tax credit contrary to what some in Washington seem to think?

The breakdown of homes sales show that first-time home buyers lead the charge and accounted for 45 percent of home sales during the past year. Currently the $8,000 tax credit is available for those that make under $75,000 a year as an individual, $150,000 jointly and have not owned a home in the past three years. By expanding the tax credit to those that earn less than $150,000 a year as an individual, $300,000 jointly it will allow more families to benefit from the current conditions and have incentive to do so. Along with helping more families to benefit from the current conditions it will also help to reduce the current inventory of homes on the market which is still hovering around close to 8 percent.

NAR President Charles McMillan said affordability conditions remain historically high. “Potential first-time buyers can take heart in that affordability conditions this year are the highest on record dating back to 1970, but with the first-time buyer tax credit scheduled to expire at the end of next month, people could hold back from entering the market,” he said. “Our read is that housing overshot on the downside because homes are selling for less than replacement construction costs in much of the country, and the home price-to-income ratio has fallen below the historical average.”

Total housing inventory at the end of September fell 7.5 percent which represents an 7.8-month supply at the current sales pace, down from an 9.3-month supply in August. Unsold inventory totals are 15.0 percent below a year ago.

“The current housing supply is the lowest we’ve seen in two and a half years,” Yun said. “If we could continue to absorb inventory at this pace, home prices would return to normal, modest appreciation patterns next year.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 5.06 percent in September from 5.19 percent in August; the rate was 6.04 percent in September 2008.

The national median existing-home price for all housing types was $174,900 in September, which is 8.5 percent lower than September 2008. Distressed properties continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes in the same area.

Single-family home sales rose 9.4 percent in September and are 7.7 percent above the level in September 2008. The median existing single-family home price was $174,900 in September, which is 8.1 percent below a year ago.

Existing condominium and co-op sales jumped 9.7 percent in September and are 9.7 percent above the pace a year ago. The median existing condo price was $175,100 in September, down 11.7 percent from September 2008

Status of the $8k First-Time Homebuyer Tax Credit

With the November 30th deadline quickly approaching the fait of the $8k first-time homebuyer tax credit is still looming. With all the activity that the tax-credit is responsible for how could the current administration not extend it or open it to more than just first-time homebuyers. Easy according to opponents, there are a lot of pressing economic issues including talks of another stimulus package.

With record low interest rates, low prices its easy to assume that we can do without an extension on the tax credit. So with less than a week left to lock in a deal that will allow you to close a your transaction and take advantage of the pure $8k tax credit are you willing to risk it?

I’ve noticed as I just went through the home currently available thier are a lot of families that are not willing to risk it and are locking in deals right now. Out of the 20 homes that I’ve kept an eye on over the last month I will estimate that 10, if not more, of them have had a smart family’s lock up a contract on them and have them pending inspection within the last week. These homes and condos fall within the price range of a first-time homebuyer.

Another home that I have a client looking at in the morning got an offer on it today. Let the games begin, multiple offers come in and the mad rush begin. It reminds me of the stories that you here about or watch on the news regarding the day after Thangiving sales. People are getting trampled and smothered trying to get their hands on that prized electronic or in this case its that house or condo that has the price tag as if it were 2004.

According to the article written by Jeanne Sahadi, a senior writer at CNN.Money.com, “While momentum is building on Capitol Hill to extend the $8,000 first-time homebuyer credit, President Obama’s housing secretary said Tuesday the administration has not decided whether to support its expansion.

Housing Secretary Shaun Donovan told the Senate Banking Committee that the administration wanted more time to better assess the cost of the credit, which expires on Nov. 30.

“Within a few weeks we’ll have sufficient data to get to a conclusion on this,” Donovan said. “It’s a question of understanding more fully the costs to the taxpayer.”

He said there is “clear evidence” the credit has had some positive benefits and that its expiration could have “some negative implications” for the housing market.

At the same time, Donovan said that the end of the credit would not be “catastrophic” because of other actions the government is taking to support the flagging housing market. Interest rates are being kept low and the Federal Housing Administration is playing a more prominent role in lending to homebuyers.

But lawmakers pushing to extend the credit are concerned the housing market is going “to die a sudden death” after Nov. 30, as Sen. Johnny Isakson, R-Ga., said Tuesday.

Isakson and other supporters believe that keeping the credit in place could further boost home sales, stabilize housing prices and generate jobs.

Isakson and Senate Banking Chairman Christopher Dodd, D-Conn., have co-sponsored an amendment that would extend the credit until the end of June 2010 and be available to single filers making up to $150,000 and joint filers making up to $300,000. Currently the credit is limited to homebuyers who haven’t owned a home for the past three years, who make half those amounts and who close on their purchases by Nov. 30.

What Is An Escrow Account

n escrow account is a designated savings account into which funds get deposited for a specific purpose.

With respect to real estate and home loans, escrow accounts are used to pay real estate tax bills and homeowners insurance payments.

Escrow accounts are managed and disbursed by lenders.

When a homeowner “escrows” his mortgage, along with his scheduled monthly mortgage payment, he must also send an additional payment to the lender equal to 1/12 of the home’s annual real estate tax bill plus 1/12 of the annual homeowners insurance bill.

By sending a pro rata portion of the tax and insurance bill each month, the homeowner’s escrow account will always, in theory, have enough funds to make payments in full as tax bills and insurance premiums come due.

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Why Here Why Now

Maybe you’re still on the fence or uncertain about purchasing a home because you’re not sure what the future holds in Washington State, more specifically in King County and surrounding areas. First and foremost you have to look at purchasing a home as a marathon not a sprint. Now more than ever before you have to look at purchasing a home as a long term not short term investment. If you’re still questioning or wondering why is that you are here in this beautiful state and why now you have an opportunity of a lifetime let me help you out.
Ask yourself is this a place that has longevity? I and a few others seem to believe so. There are certain reasons why we have not suffered the same ramifications as other states when it comes to price drops. For one we have several Fortune 500 companies that keep our economy going and growing and keep our residents employed. Companies such as Microsoft, Amazon.com, Starbuck’s and Boeing just to name a few. Even though these companies have taken losses, along with countless others, they are here to stay and will not be going anywhere anytime soon. Not only are these companies providing high paying jobs that are attracting the young leaders and innovators of tomorrow but they will also be the companies hiring in droves once the economy rebounds from the greatest recession since the Great Depression. Simply stated by Dr. Florida, “Seattle is a high-tech and lifestyle Mecca.”
According to Money Magazine, King County had three cities that ranked in the top 25 Best Place to Live. One of those Mukilteo was ranked in the top 10. We have consistently ranked in the top tier of most educated populations in the country. In a recent article in the Wall Street Journal, Seattle was tied for first place as the Next Youth-Magnet Cities. According to Sue Shellenbarger,
“Where young adults settle is no small thing. People 18 to 29 are the most mobile age group, and their past migration patterns have defined the future of regions, from the long rural exodus of the 1900s to the Silicon Valley boom of the 1990s. Youth-magnet cities gain an enviable cultural allure and a labor-market edge.
The young are likely to be more restless than usual when the recovery comes. The recession has brought migration to a grinding halt: Fewer people moved across state lines in 2008 than at any time since 1950, when the population was smaller by half, says William Frey, a senior fellow at the Brookings Institution, a nonprofit Washington research organization.”
Simply put this is the place to be and you now have the opportunity of a lifetime so take advantage while you can of low housing prices, record low interest rates, and tax credits that you may never see again in your lifetime.

Time is Running Out

The deadline for the $8,000 first-time federal home buyer tax credit is quickly approaching. In order to qualify for the tax credit your transaction must be completed or closed by the deadline of November 30.

With the deadline quickly approaching what’s going to happen if the contract you have on a home is not completed by November 30th?

This very question could effect thousands of people and thousands of transactions especially if the home that you have dreamed of purchasing is in a short sale situation.

Right now its hard to say with any certainty if the tax credit will be extended but my professional opinion is that it will for how long and what dollar amount is the real question. Currently there is legislation on the table to extend the tax credit and broaden the scope of those that would be able to take advantage of it.

According to Charles McMillan, president of the National Association of Realtors, “the tax credit has been working beautifully, helping push home sales higher in April, May, June and July. We estimate that up to 2 million first-time home buyers will take advantage of the $8,000 tax credit this year-with about 350,000 of those sales coming as a direct result of the credit. The delays we’re all experiencing as a result of distressed sales and new appraisal rules mean that many buyers probably won’t make the November 30 closing deadline. That’s why we’re asking Congress to continue the credit and expand it all home buyers”

For those of you waiting until the last minute keep in mind that the normal time frame to purchase a home from start to finish takes 30-45 days, which doesn’t include house hunting. With some of the new regulations put in place, especially with appraisers, transactions are averaging close to the 40 day mark. Which means you have about 3 weeks max to find that first home you’ve dreamed of and worked so hard for all these years putting you one step closer to your slice of the American Dream.