The NEW IMPROVED Home Buyer’s Tax Credit

On November 6th the President signed a bill passed by the US Senate and House of Representatives extending the current First Time Home Buyers Tax Credit AND creating a tax credit for 2nd time and subsequent primary residence purchasers. The First Time Home Buyer credit has not changed except to be extended through the end of April 2010. Any home buyer qualified under this program and is under contract to buy a home by the end of April; closing by the end of June will be able to receive an $8,000 credit from the government.

The First Time Home Buyer Tax Credit in particular has really help stabilize our area home prices which fall into the typical First Time Home Buyer segment. For example, before the tax credit had been set at an $8,000 credit vs. the previous $7,500 government loan we had been seeing nearly a years worth of inventory in our market in the $100,000-$250,000 price range. That means that if the same number of buyers kept purchasing homes it would have take a year to sale every home in that market segment. That is assume no more homes came on the market, of course. At the end of October 2009 we see that segment at about 7 months of inventory which is very close to having a balanced market.

The NEW tax credit is for 2nd time and subsequent purchases available to individuals and couples who are buying a primary residence to replace the one they currently own. If you have lived in your current primary residence for 5 of the last 8 years and you meet the income limits you would be qualified to receive a $6,500 credit for a couple or $3,500 for an individual. The signing date of November 6th 2009 is significant because any qualified purchase after that date can file for the credit.

One interesting note is that the bill doesn’t seem to say you can’t rent your current home and then buy the new primary residence thereby waiting for a little better time to sale that home. There would be some tax consideration for doing or not doing this but it may be something to consider if you think you may want to be an investment property owner for a little while.

Also of interest, this is truly a CREDIT not a tax deduction. For example if you are due $1,000 back on your taxes at the end of the year and you qualified for the $6,500 credit, you would then receive a check for $7,500.

There are Income limits and home purchase limits with both of these credits. Both are fairly generous. You can not make over $125,000 Single, and $225,000 as a Married couple. The home purchase can not be over $800,000.

For additional information on this credit we have created a side by side comparison for you. Please do not hesitate to contact me if you have additional questions.

Todd Long
Broker-In-Charge
Coldwell Banker United Realtors
todd.long @ cbunited.com

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Ray and Margaret share their home and pets with Currents Magazine

Ray and Margaret, agents in my office, had the opportunity to share their home and lives with their pets, Harley and Davidson, in a recent issue of Lake Norman Currents Magazine. I think it is a very fun spread, well written and beautiful photography. This home is on the market for sale as well if you are interested.

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Coldwell Banker President and CEO on TV Today talking about the housing market.

Jim Gillespie, president and chief executive officer of Coldwell Banker Real Estate LLC, will appear live today at 4:45 p.m. CNBC’s Closing Bell with Maria Bartiromo. Jim will discuss the state of the housing market. He will also appear tomorrow on Fox Business News live at 11:15 AM EST to discuss the housing market and the Coldwell Banker College Home Price Comparison Index.

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Timing the market

The most recent Case-Shiller price index shows home prices up in 17 of the 20 markets it tracks. This is a good sign but what does this really tell us about the Real Estate market? The Case-Shiller price index that came out October 27th is actually based on numbers from August. The good news is we should continue to see positive signs from this widely monitored index for at least a few more months. From the indicators I watch September and October have been steady as well. What indicators do I watch that the big economist do not? A less scientific approach for sure. I follow Real Estate Professionals in major markets on Twitter and Real Estate Blogs. I realize true economist can’t rely on a less scientific approach like twitter and individual bloggers, but I can. These ground level Real Estate combatants may not give me a hard fast number to nail down as to price gains in a market or number of sales for the month but it does give me a feel for how the national market is moving, RIGHT NOW. As an example @PhxREguy (Jay Thompson) recently tweeted this blog post that he wrote. He talks about the resurgence of new home construction around his neighborhood in Phoenix. The national media is just now reporting that new home construction was up 9.4% for the month of September. That’s great news from a month ago but the Phoenix Real Estate Guy tells us in his post that new home construction is still gaining ground in Phoenix as of October 31st.

Some people may look at this and say so what, September/October, what is the difference? It may only make a difference to me, and the agents I manage, as we try to guide our clients as to the best course of action in their Real Estate endeavors. I feel like it is my job to know what has happened locally and nationally in the historical past of Real Estate, what the media is reporting with a little market lag time, what is actually happening right now and what the future indicators are forecasting. On a personal note, I really enjoy being knowledgeable about a subject, real estate, that is of interest to a wide variety of people. Real Estate makes for fun social conversations.

I think we are going to see the extension of the first time home buyer $8000 tax credit extended as well as expanding this to move up buyers for $6500 who want to sale a primary residence and buy a new one. We have seen the first time home buyer credit bring our inventory back to a manageable number of homes on the market in the sub $250,000 price points. The expansion of this credit to move up buyers should have a similar effect on price points above $250,000. This credit will most likely end with contracts written in April which is probably an appropriate time because we usually see a small upswing in purchase activity in the summer anyway. We still need to get unemployment under control. I firmly believe the 9-10% unemployment number is estimated low. I think it is closer to 17% nationally and maybe a little higher around Mooresville. No matter what I feel like we are seeing a bottom form in house prices in this area. There is no way to predict the absolute bottom to any market. If you are thinking a home purchase is a good decision for you don’t try to time the market. You will be missing a great opportunity at historic low prices and historic low interest rates if you do not act by the spring of 2010. That is my bit of advice.

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