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doug
Homebuyer Tax Credit Update!
Today, President Obama signed a bill to extend the tax credit for first-time homebuyers (FTHBs) through June 30, 2010. The bill also opens up opportunities for others who are not buying a home for the first time.
TAX CREDIT OVERVIEW
Who Gets What?
First-Time Homebuyers (FTHBs): First-time homebuyers (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000
Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.
Current Owners: The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.
Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.
What are the New Deadlines?
In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.
What are the Income Caps?
The amount of income someone can earn and qualify for the full amount of the credit has been increased.
Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible
Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.
What is the Maximum Purchase Price?
Qualifying buyers may purchase a property with a maximum sale price of $800,000.
What is a Tax Credit?
A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual's primary residence.
How Much are First-Time Homebuyers (FTHB) Eligible to Receive?
An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.
Who is Eligible for FTHB Tax Credit?
Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible.
This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.
As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.
People who watch housing prices have predicted for months that another deluge of foreclosed homes would soon hit the market - once again crushing Sacramento-area property values.
But the flood of bank repos hasn't materialized. And now, a leading California foreclosure analyst says it probably won't.
"From the things I'm seeing, there's not going to be a wave any time soon," said Sean O'Toole, president of ForeclosureRadar, a Contra Costa County firm that tracks mortgage defaults and foreclosures.
Despite a growing number of loan defaults and delinquencies, O'Toole said banks are now selling more homes than they're repossessing - and political pressure on them to work with homeowners is slowing foreclosure rates. Other market watchers also see banks slowly dribbling out their supply of repossessed homes.
"From all appearances, it does look like they're managing it better," said Charlene Singley, president of the Sacramento Association of Realtors.
If the supply of homes for sale remains in balance with demand, the danger of another sharp downturn in prices is lessened, at least in the short run, O'Toole and others said Thursday.
The prospect of another wave of new foreclosures has long threatened to destabilize a capital-area market precariously balanced by massive repo sell-offs, curtailment of new-home production and buyers enticed by lower prices, low interest rates and tax credits.
Even as disaster scenarios remain easy to imagine, the number of area for-sale signs is now at an encouraging 52-month low.
Still, the downside to this relative steadiness in the near term, O'Toole acknowledged, may be that it will take longer to work through the mortgage crisis and recover.
On Thursday, La Jolla researcher MDA DataQuick offered fresh evidence of the market's tenuous balance.
Regional home sales in September ticked up slightly from August, with 3,454 new and existing homes changing hands in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties. Yet September marked a fourth straight month in which sales fell below the same time last year.
That's because recent sales have been unable to match last year's sharp rise as banks unloaded thousands of repos, a phenomenon that also put downward pressure on area home values. O'Toole said banks have cut their statewide repo inventory by 41 percent in the past year.
Now that the repo sales pace has slowed in Sacramento County - from 70 percent of sales in February to 53 percent in September - median sales prices have quickly stabilized.
DataQuick reported a September median price of $176,000 in Sacramento County. Median is that point where half the homes cost more and half less. That was down from a 2009 high of $180,000 in August, but still well above February's housing bust low of $160,000.
Fewer repo listings this year brought another phenomenon not seen since the boom: bidding wars. The phenomenon so frustrated state employee Lauri Lathrop that she finally bought a new house in Elk Grove in September.
"I was putting in offers $15,000 above the asking price, and I was getting outbid," she said Thursday. "I saw this new house and nobody could outbid me. It was like it was mine," she said.
Lathrop obtained a favorable interest rate and an $8,000 federal tax credit for first-time buyers - though she missed the window for a $10,000 state tax credit for buyers of new homes.
Such perks combined with affordability to prod more buyers off the fence this year. Sales of new and existing homes combined from January through September this year total 30,231, beating 29,751 during the same period in 2008 and 26,777 from January through September 2007.
As a result, the number of for-sale signs in El Dorado, Placer, Sacramento and Yolo counties has fallen to May 2005 lows, according to Sacramento researcher TrendGraphix.
The affiliate of Lyon Real Estate counted 6,129 listings in the four counties at the end of September. The numbers have fallen for 25 straight months since peaking at 16,262 in August 2007.
TrendGraphix said 13.4 percent of current listings are bank repos and 27 percent are short sales, in which owners hope lenders will accept a sales price below what they owe. That means 40 percent are so-called "distress sales."
That's scary, but real estate agents like Singley and Carey Covey of Cook Real Estate maintain there is an ample supply of buyers. And sales statistics from the Sacramento Association of Realtors show that banks are faster to approve short sales now than months ago.
As the repo share of the sales mix has continued to decline, short sales rose to almost 20 percent of sales in September in Sacramento County and the city of West Sacramento, SAR reported.
Covey, who specializes in selling bank-owned homes, said he believes the supply of repos will remain steady. But he expects no trouble selling them at such a pace.
"As of right now, we're still short on supply, and there's still a lot of demand," he said.
By Jim Wasserman
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Published: Friday, Oct. 16, 2009 - 12:00 am | Page 1A
Last Modified: Monday, Oct. 19, 2009 - 3:14 pm
Doug's Take: Well, anyone who is involved with the real estate market in the Sacramento area would say a loud "Duh" after reading the title. Over the past 6 months it's been new buyer, after new buyer that is also figuring this out first hand. One major factor that is showing the market has stabilized and that inventory is extremely low, the number of "regular" sales and flips have increased over the last few months. Two years ago we had way too much inventory, now we have too little. i think by some point next year we will reach a more equilibrium in terms of supply and demand. I hope. :)
clear skies,
doug
Some encouraging news on the extension of the $8000 tax credit...while it is not a done deal (as it still must be reconciled between the House and Senate and then voted on for final approval), it's looking good. And it's not only looking good for the extension, but there are some additional enhancements to the credit in the works as well. Yesterday, the Senate reached an agreement to extend the $8000 tax credit for first-time home buyers. They also added a $6,500 tax credit for other primary home purchasers, meaning not just limited to first time home buyers. They also raised the qualifying income limits in a very meaningful way - singles were increased from $75,000 to $125,000, and joint taxpayers from $150,000 to $250,000. Buyers must have executed purchase agreements in hand by April 30th, and then will have until June 30th to close. More details are likely to come, and changes could be made as reconciliation and voting takes place.
Proposed Plan Would Give Repeat Buyers Reduced Tax Credit
STEPHEN OHLEMACHER, Associated Press Writer
October 28, 2009
Senators agreed Wednesday to extend a popular tax credit for first-time homebuyers and to offer a reduced credit to some repeat buyers.
The tax credit provides up to $8,000 to first-time homebuyers but is set to expire at the end of November. The Commerce Department said Wednesday that new homes sales fell 3.6 percent in September, and some industry representatives blamed uncertainty about the tax credit.
Senators agreed to extend the existing tax credit for first-time homebuyers while offering a reduced credit of up to $6,500 to repeat buyers who have owned their current homes for at least five years, said Regan Lachapelle, a spokeswoman for Senate Majority Leader Harry Reid, D-Nev.
The tax credits would be available to homebuyers who sign sales agreements by the end of April. They would have until the end of June to close on their new homes, according to a summary of the legislation being circulated among lawmakers.
Sen. Chris Dodd, D-Conn., has been negotiating for several weeks with Sen. Johnny Isakson, R-Ga., to craft an extended tax credit for homebuyers that would pass the Senate.
Lawmakers didn't release a cost estimate for extending the tax credit, though similar proposals were projected to cost about $10 billion.
Industry representatives said uncertainty about the tax credit is hurting new home sales. September's decline was the first since March.
It takes 45 days to 60 days to close on a house, making it unlikely a sale made today would be consummated by the end of November, said Lucien Salvant, spokesman for the National Association of Realtors.
"Buyers right now have an incentive to hold off, not knowing whether the credit will be extended," Salvant said.
About 1.4 million first-time home buyers have qualified for the credit through August. The National Association of Realtors estimates that 350,000 of them would not have purchased their homes without the credit.
Doug's Take: The House will still need to approve this bill before it can go into law. i'll keep you updated but it sure sounds like we are getting close to an extension of the tax credit and it might have some sort of credit for non-first time buyers as well.
clear skies,
doug
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