Ron Brown FHA & VA Home Loan Specialist

Today the Senate finally passed H.R. 3548, the bill extending unemployment benefits, and with it comes an Amendment extending the Tax Credit for First Time Home Buyers as well as an exception allowing for move up buyers to get their own credit.

In its current form the bill extends the $8,000 Tax Credit for First Time buyers as long as they are under contract before May 1, 2010, and close on the home before July 1, 2010.

The exception for move up buyers reads "In the case of an individual (and if married, such individual's spouse) who has owned and used the same residence as such individual's principal residence for any 5-consecutive-year period during the 8 year periodending on the date of the purchse of a subsequent principal residence, such individual shall be treated as a first-time homebuyer..."

The bill goes on to state that in that circumstance, that individual shall receive a $6,500 tax credit rather than the $8,000 for a true first time buyer.

The final vote by the Senate was 98 to 0 in favor, and the House is expected to make this bill a priority, possibly leading to a vote next week. Let's hope this gets done quickly so we can all stop playing the "rumor game" when it comes to the extension of this credit.

Today the Federal Government is reporting some of the results achieved from the $787 Billion Stimulus package with regard to employment. Depending on the source you choose to listen to, anywhere from one quarter to one-half of the $787 Billion has been distributed.

In Puyallup, using my office zip code of 98372, there has been one contract reported with a value of $192,000, and it has resulted in in 0.5 (yes, that is one half) jobs created. I'm not sure how you calculate half of a job, maybe it is a 20 hour per week job? For the greater Puyallup area (zip codes 98371, 98372, 98373, 98274, & 98375) there have been two contracts awarded at a total cost of $574,825, and the published result of jobs created equals 1 (both contracts apparently created/saved one half of one job). Forgive me for feeling underwhelmed that our government spent over half a million dollars to save, or create one job.

Today the Federal Government is reporting some of the results achieved from the $787 Billion Stimulus package with regard to employment. Depending on the source you choose to listen to, anywhere from one quarter to one-half of the $787 Billion has been distributed.

In Puyallup, using my office zip code of 98372, there has been one contract reported with a value of $192,000, and it has resulted in in 0.5 (yes, that is one half) jobs created. I'm not sure how you calculate half of a job, maybe it is a 20 hour per week job? For the greater Puyallup area (zip codes 98371, 98372, 98373, 98274, & 98375) there have been two contracts awarded at a total cost of $574,825, and the published result of jobs created equals 1 (both contracts apparently created/saved one half of one job). Forgive me for feeling underwhelmed that our government spent over half a million dollars to save, or create one job.

Interestingly, I found a project listed with a cost of $999,310 that is attributed to Milton, WA just north of us by a couple of miles. The Recipient Company is the Boart Longyear Company, and their subsidiary Holt Drilling. While these funds did not save or create any jobs, at least the money was filtered through our area?

For Washington State as a whole, the claim is 2,909 jobs were created, or saved at a cost of $228,820,000 received so far. that averages out to $78,659 per job. From the various news articles I have read so far, the national average cost of each job created or saved so far varies from $250,000 to as much as $600,000. Washington State appears to be on the bargain end of the spectrum at $78,659 when compared to South Carolina, which has received $219,560,000 in order to create/save 146 jobs (roughly $1.5 Million per job).

All in all, I am very impressed with the transparency of the spending. I have never before been able to find out what my government does with our money at nearly the same speed as they spend it!

To see how the money is being spent in your area visit Recovery.gov

Is there an Extension of the FTHB Tax Credit?

Sorry, but as of Thursday the 29th, the short answer to this is No.

The flurry of news came from an unofficial statement made by an aid to Senator Harry Reid coupled with a public statement made by Senator Chris Dodd who told reporters on Tuesday that he had a "Done Deal." Unfortunately, this is the way Washington DC works, and the media ran with the story before confirming the facts.

The Facts as of October 29th

Senators Reid, and Baucus are trying to add an amendment to a bill extending unemployment benefits that would extend the current Tax Credit until the end of next year. However, this would not open the credit to existing homeowners, or change the amount of the credit. Also, the credit would be phased out completely over that time period. The Current $8,000 would be trimmed to $6,000 at the start of the 2nd quarter of 2010, then $4,000 for the 3rd quarter, and $2,000 for the last quarter.

The Good News is that there is widespread support for the extension, but the reality is we are still waiting for both Houses of Congress to vote on anything, and the White House is now expressing concern over costs of extending the Credit.

As we draw closer to the November 30th Deadline for taking advantage of the $8,000 First Time Home Buyer Tax Credit, the chatter about extending it is reaching a fever pitch. While this topic of conversation is very popular, I believe the extension will not be coming anytime soon for 3 reason: Urgency, Credibility, and Politics.

The first issue I bring up is urgency. One of the first rules of Marketing for the purpose of increasing sales is to create a sense of urgency. Any incentive to purchase that never expires is really not an incentive at all, but rather a normal feature of that business. Limited availability of a significant savings or reward is intended to spur people into action, and that is what the Tax Credit was designed to do. The "Cash for Clunkers"program is a prime example of this response to limited availability.

This brings me to my second point - Credibility. Remember the original First Time Home Buyer Tax Credit that was part of the initial Stimulus Bill? That is the one where the credit was for $7,500, and took the form of a no interest loan repaid through taxes over a 15 year period. Buyers that purchased under that program are not exactly thrilled that they have to repay their tax credit when those who waited are getting more money, and don't have to make any repayment. The last thing we need is for potential buyers to start holding out for a better deal in the "next stimulus."

Finally, there is the political angle to all of this. Politicians are some of the best sales people on the planet, and they are in a position to maximize their returns. Right now, they can point to this program, and take credit for the positive results in the housing market's increased sales year over year. That is also the reason they chose an expiration date of November 30th rather than the end of the calendar year. What typically happens to home salesat this point of the year? They decline of course, which is why we have "seasonally adjusted" housing statistics. Our elected Representatives will get to go home on their holiday break, and "listen to their constituents" who will point out that sales are down (as they are every year at this time). Then they will be able to return to Washington DC, playing the role of Hero by either extending the Tax Credit, or creating another all new one in order to "jump start" housing again as we head into Spring.

In the end, the tax credit has been an effective tool in helping to boost home sales, but the housing market is far from cured. The result is that we do need some ongoing help(especially in the" move up" market), but hopefully we do not become viewed in the same light as the local retailer that has had a "going out of business - everything must go now" sign in the window for the last 3 years.

I have been blogging on a different financial website a lot over the last year, and one of the most popular topics has been what we now call FDIC Friday. So far, we have seen just about every State lose at least one bank, but there is a special accomplishment for Georgia with 20 of the current 105 bank failures this year occurring in that state. So far no one I know has been able to come up with a good reason as to why, but there really should be an investigation into how this has come to be. Anyone care to enlighten us as to what the heck is going on in Georgia?

I recently heard a few loan officers here in the Puyallup area lamenting the fact that many of their past clients have been calling them for advice on how to get a loan modification, or negotiate for new terms on what has become an unserviceable loan. Personally, I know that the vast majority of my clients are happy with their mortgage, and home. Then again, that is probably because I specialize in 30 year Fixed FHA & VA Loans, and never got into pushing ARM's that put my clients in danger. Perhaps we should all take a look in the mirror, and ask ourselves if we had anything to do with what is going on?