Jeff Katz

Home buyers have a golden opportunity to potentially receive as much as $18,000 in state and federal income tax credits. Please note there are separate tax credits and separate criteria for both.

The state of California has set aside $100 million in bonds to stimulate the purchase of brand new never lived in homes. Buyers can receive up to a $10,000 state tax credit, with the main criteria is that the home is brand new, it must be owner occupied, and you must live in the home for two years. You do not have to pay any portion of the tax credit back. You do not have to be a first time buyer either. This allocation of funds is only available on a first come first served basis and when the money is gone, so will the tax credit. For more info visit the Franchise Tax Board website: www.ftb.ca.gov

The federal government as part of the stimulus package is an $8000 tax credit, however unlike the state credit, the federal credit applies to first time buyers only and is available on homes purchased between January 1, 2009 before December 1, 2009. Single taxpayers with income up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit. The home does not need to be brand new to qualify for the federal tax credit. A resource is www.federalhousingtaxcredit.com for more information.

Hypothetically, if you are a first time buyer purchasing a brand new home who makes at or below the qualifying income could take as much as $18,000 in state and federal tax credits. This, along with low interest rates, is a terrific incentive to be in the housing market.

It is always a good idea to get tax advice prior to making a purchase.

February 3, 2009 – I read where there is discussion in the new administration about reducing interest rates on home mortgages to 4%. The theory is that would help stimulate sales and put the brakes on sliding home prices, as well as give a shot in the arm to the economy. As a Realtor my first instinct is to say that is a great idea. It seems logical, and I would support a program that is beneficial to my livelihood and to the community.

However after thinking about it, I’m not so sure that would have the intended effect. After all rates have been in the high 4’s and low 5’s for some time now, and even if you reduced the rate to 3%, if its harder to qualify (which it is) with fewer financing options available, and people feel insecure about their jobs, and their stock and retirement portfolio’s shrinking, will lowering the rate help? The Bank of England recently lowered its prime rate to the lowest amount since 1694….really. The economy in the UK is in a free fall despite the government intervention of banks there, along the lines of what the US has done.

It’s also my belief that as long as the stock market continues to drop, so will the confidence in the economy. Unfortunately the business of stocks and the business of real estate share the same economic bed to some degree. The bottom line is despite having the so called best and brightest minds looking at the economic problems, the government is still throwing darts at the dart board as far as what to do about the economy.

One thing that I hear very little about – despite lowering of rates, I read that 60% of applicant’s who are looking to refinance their homes, can’t qualify due to not having enough equity in their homes. Lenders want to see at least 20% equity and that is not possible for many Americans. I would like to see these homeowners, assuming they have good credit and payment record, be able to successfully refinance despite their equity position. The government talks a great deal about wanting to reduce foreclosures and keep people in their homes, and that seems like an easy way to do it. Billions of taxpayer dollars have been given to banks that have been hoarding the cash instead of putting it back out there. I know people with good payment and credit history who would love to refinance to lower their payment but can’t because of restrictive rules. Let’s see that changed immediately.

I did not want to vent and write something without offering at least a partial solution that would help many existing homeowners keep their homes. Thank you for reading my blog entry.

2008 brought financial destruction to many people. What will 2009 bring? The brightest minds in the country did not foresee the meltdown of the stock market. Seeing the economy shrivel was like watching the air being released from a balloon. What will 2009 bring?

If you believe the industry analysis (which many in the public take with a high degree of cynicism), the market will bottom out in 2009 and start to rebound in 2010. If you believe the sellers, the worst has passed…if you believe home buyers, the market has a long way to go before it bottoms (who really knows when the bottom is?). I guess it depends which position you are in.

The bottom line is nobody can predict what will happen. There are a few variables that can and will greatly impact the Humboldt County real estate market in 2009:

1. Interest rates – as of today, rates have not been this low since the 1960’s. If rates can remain the same or even drop, that can, and likely will trigger many buyers back into the market who are sitting on the fence. And if that happens you will see prices stabilize and possibly go up at the entry level points in our local market. Home sales for properties under $300,000 have remained consistent. If interest rates increase, that will put a wet blanket on real estate sales.

1. Foreclosures - Here in Humboldt County the foreclosure levels are one of the lowest in California. Should that number increase that may further depress prices.

1. Standing inventory of homes. As of 12/29/2008 there are 601 single family homes on the market in the county. That has fluctuated between 550-800 this year, so the inventory is near a low point. Statistically approximately one in every five properties has been going under contract this year. That has remained consistent this year. Should inventory numbers drop and interest rates remain constant, that could be good for sellers.

1. Stock market – many potential buyers lost money in the stock market that could have been used for real estate investing. An improvement in the stock market could be a shot in the arm for the economy and overall confidence.

1. California’s budget mess – wow that is a real wild card. The state is going broke and in this area many jobs are dependent on income derived from the state. That is a wait and see.

1. Financing – Will it become easier or more difficult to get financing. Are banks who took billions of taxpayer dollars with the supposed intent to grease the economy and lend money, continue to hoard the cash or give qualified buyers the opportunity to take advantage of historically low interest rates?

So the bottom line answer to what the real estate market will do in 2009 is anyone’s guess. Some facts can’t be argued: Interest rates are at historical lows; Prices are down in great numbers from the peak markets; Real estate as a long term investment is always solid; The population numbers are going up, not down and people have to live somewhere; The tax benefits of real estate ownership (compared to renting) are significant.

What I tell buyers is if you plan to be in the house 3-5 years, you will get the benefit of freedom of enjoyment of your own castle. The tax and appreciation benefits are ancillary but significant both immediately and over time. If anyone can predict when is “bottom” please let me know. I will wait and see what happens with any of the six above items I listed before making any predictions. I will say that I hope to be personally in the market in 2009 as a buyer.

Thank you for reading my blog entry. Happy New Year!