About Douglas County, NE

In my last blog First-time Home Buyer Tax Credit Extended and Expanded I covered the nuts and bolts of how the First-Time Home Buyer Tax Credit has changed. Now it's time to dig a little deeper and examine if this tax credit is a good idea.

Cost

The first aspect to look at is cost. The previous tax credit cost the federal government approximately $10.8 billion in lost tax revenue through August 22, 2009. The final numbers for its cost through November 30, 2009 are not yet available. Because many people who got the credit were going to buy a home anyway and because of rampant fraud, that this amounts to $43,000 for each home sale that generated that wouldn't have occurred otherwise.

Fraud

This brings us to the fraud that has occurred. The initial credit had no means in place of verifying if someone legitimately qualified for the credit. As such there were many people obtaining the $8,000 credit that either had not bought a home or who were not actually first-time buyers. Investigations found that a number of people fraudulently claiming the credit were IRS employees and minors, one as young as four years old. An inspector general for the Treasury Department stated that hundreds of millions of dollars in fraudulent claims have been identified.

The new tax credit now requires that buyers submit a copy of their HUD settlement statement as proof that they bought a home. This flimsy requirement does not, however do anything to verify that the property is being purchased as a primary residence, as required, as opposed to being used as a rental or second home.

Benefit?

After looking at the downside of the First-Time Home Buyer Tax Credit, is there an upside? Will it spur more home sales in Omaha? Will it boost Omaha real estate values? Economists that have weighed in on the national affect of the original First-Time Home Buyer Tax Credit and estimates of the number of home sales generated due to the credit range from 200,000 to 400,000.

Locally it seemed that during the initial tax credit typical starter homes were selling a little more briskly than I might have expected. I would assume this trend will continue now that the credit has been extended. How will the expansion of the tax credit to current homeowners affect the Omaha real estate market? The hope of course is that these buyers will help reduce the supply of higher priced homes and I anticipate that this will happen at least to some degree. On the other hand for each of these homeowners that purchases a new home, they will also be increasing inventory when they go to sell their current home.

My Take on it

What do I think? Obviously, as a Realtor®, I benefit if more sales are generated and I expect that to be the case. However I do not think it is the best use of our tax dollars. With the economy as bad as it is and the government spending money as fast as it can print it, I think this is a huge waste of money. Never the less, if you are in a position to take advantage of it, then more power to you.

Omaha Real Estate Market Report October 2009.  There are a couple of interesting statistics I wanted to point out.  Active listings continue to be down by 10% to 15% from 2008.  October 2009 Sold listings 672 are up 51% from 446 sold in October 2008.  This is not to surprising because the last quarter of the year in 2008 was terrible for the economy in general and for real estate sales. 

The decrease in active listings has helped stabilize home prices, but pricing continues to be under pressure. The government extended and expanded the Home Buyer Tax Credit until April 30, 2009.  They added a provision for move up or down buyers.  Check out my recent blog post for details.  Interest rates continue to remain low and stable, which will continue to help support the real estate market.

Douglas County, Omaha Real Estate Market Report (Active, Pending, Sold):

Omaha, NE (All of Douglas County)

• Active (11/9/2009):  3,294
• Under Contract - Pending (11/9/2009):  1,022
• Sold Oct 1, 2009 to Oct 31, 2009:  672

The Stimulus Plan has just extended the tax credit of up to $8000 for the next couple of months when buying a home if you haven't owned in the last three years . It has also expanded to include home buyers who have owned a home for the last 5 out of 8 years, up to$6500. That part is entirely new!

Visit this website for FAQs: Tax Credit Questions Prices are great, rates are excellent. It is time for you to own a brand new home!

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Please consult an accountant for tax advice.

First-time Home Buyer Tax Credit Extended and Expanded

Yesterday the president signed a billed that extended the First-time Home Buyer Tax Credit. This bill also expanded the credit beyond just first-time buyers.

The big differences between the original tax credit and the new and improved version are that now current homeowners are eligible for a $6,500 tax credit, the income limits to qualify have been raised, and the new expiration date is April 30, 2010 but if one has a binding contract by the deadline they can still get the credit if they close the sale before July 1, 2010.

Below is a chart provided by the National Association of Realtors® comparing the original and the new versions of the tax credit.

How will this affect the Omaha real estate market? Was this tax credit a good idea? Stay tuned for my follow-up blog post.

UPDATE: Here is the follow-up to this post - The First-time Home Buyer Tax Credit, was it a Good Idea?

You think YOU had a bad day? News reports on Yahoo today say a man accidentally ejected himself from a plane in South Africa. Have trouble following directions? Here are what the reports had to say:

"...found himself hurtling out of the cockpit, smashing through the Perspex canopy and into space after grabbing the black- and yellow-striped handle between his legs. He had inadvertently pulled the eject lever and found himself blasted 100 metres into the sky on his rocket-powered seat."

Oops! I can't imagine which is worse: the incredible blast he must have felt upon ejection, flying through the air (without your plane) just wondering what injuries await you (possibly a mild case of, say, DEATH), or knowing you will live in infamy all of your remaining days being the gentleman who made a PRETTY BIG mistake and flung himself out of a airplane?

Amazingly, he landed with the help of his parachute with barely a scratch. So, back to which is worse. Infamy for his mistakes is (thankfully) the one that is left.

Boy, have I made mistakes, in business and in my personal life. Who hasn't? You just have to fess up to them, make amends, and go about your business. There is a fantastic quote (Author Unknown) I think of in situations where I have made myself look less than stellar:

"If you know you're going to look back on today and laugh, you might as well laugh now."

At least that way I get to laugh at the same time everyone else is. You can't dwell on your mistakes. Learn from them, move on, and really try not to make the same silly mistake again. Can someone please pass this quote along to the ejection guy? He is going to need it!