Omaha Real Estate & Omaha Homes for Sale - The Trumm Team

Omaha Existing Residential Real Estate Market for October, 2009

The number of existing homes sold in Omaha in October, 2009 was higher than in October, 2008. The prices were largely unchanged. A lot of this is due to the First Time Home Buyer Tax Credit which brought many new buyers into the market resulting in stabilized prices. I anticipate that Omaha home prices will remain stable until the end April, 2010. At that time without a signed contract buyer are ineligible for the credit. As a result unless something fundamentally changes then prices will drop.

Omaha New Construction Real Estate Market for October, 2009

In October the number of new construction homes that were sold in Omaha was up slightly over this time last year. The prices, however, are down dramatically. This is due largely to builders trying to target the first time buyer and they are doing this for two reasons. One, first time buyers do not need to sell a home in order to buy so this eliminates the worry of home sale contingencies. And two and more importantly, the First Time Home Buyer Tax Credit drew more people into the market that were looking for starter homes.

Open Houses are an Invitation to Thieves

Are you still convinced that you need to have open houses in order to sell your home? Set aside the fact that VERY few homes sell due to an open house and that real estate agents are not doing open houses in an attempt to sell your home (Why Agents REALLY do Open Houses) and never mind that the majority of people that come to an open house are not even buyers (How Serious are the Buyers?).

Now there is yet another reason to avoid doing open houses. THIEVES! With the economy down, robberies are up and open houses are an easy target. Take a look at these two articles:

Thefts at Open Houses make a Return

Md. Pair Accused of Stealing Jewelry During Open Houses

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, this amounts to $43,000 for each home sale 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 who 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 of a home purchase. 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 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 who 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.

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?