Tag Archives: buyer

End of Home Buyer Tax Credit Unlikely to Deter Sales

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A recent survey leads industry experts to believe that the end of 2010 Home Buyer Tax Credits on April 30 in not likely to put a damper on the rebound of the housing market. 

It seems that many consumers are realizing the incredible benefits of buying a home in the current housing market and that conditions have not been this favorable for buyers for quite some time. 

The survey was created by Prudential Real Estate and Relocation Services, Inc and conducted between April 15-29, 2010.  The survey was comleted by 1000 Americans whose ages varied from 25-64 with an average household income of at least $35,000.   A startling 90% of the survey respondants said that the tax credits have helped the housing market tremendously.  65% believed that the tax credit ending will have little impact on the housing market overall. 

Some concerns that were identified by these consumers were the fact that they felt that home prices and mortgage rates would rise in the next year. In fact, 46% think that the price of real estate in their local area will rise within the next year.   The two main concerns from these consumers were: rising mortgage rates and unemployment.

The general opinion based on the responses of the survey was that owning a home is still considered to be a valuable investment to most consumers. So despite that the fact that the tax credits will expire, it seems consumers still view conditions as favorable for the purchase of real estate.

Good News for Home Buyers

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Real estate prices in the Case-Shiller 10-city index have dropped 30% from the peak in 2005.  Declines this steep have not been seen since the great depression.  Mortgage rates have also declined and this along with current  prices are a great combination for buyers. 

According to expert studies, there has not been better deals with mortgage/pricing since the early 90s.  If you buy an average home today, and take out a 30-year mortgage at 5%, the annual bill for interest and repayment of principal will come to about 19 times typical weekly earnings (If you get the $8,000 refundable tax credit too, it drops below 18 times). As you can see from the bottom chart, we haven’t seen it that low since the early 1970s. In his article Latest Home Price Data Is Good News for Buyers, Brett Arends states that, “The Case-Shiller 10-city data go back to 1987. I ran the numbers comparing the index values, mortgage rates and average weekly earnings. Net conclusion: On average–an important point I’ll return to shortly–buying a home now is as cheap as it was in the mid-1990s, when houses were an absolute steal. No, the Case-Shiller data aren’t perfect. The biggest complaint is that they are weighted too much towards the coasts and the big “bubble” cities like Miami, Las Vegas and Phoenix. So I decided to run the same analyses–average prices, mortgage rates and weekly earnings–for the home price data tracked by the U.S. Census. Those numbers go back further than Case-Shiller, to 1972. “ The charts below represent Arend’s study:

annual-mortgage

weeks-to-buy-home

October Existing Home Sales Continue the Climb

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Existing home sales in October are up a record 10.1%, according to data released today.  Thanks in large part to buyers getting in at the last minute to take advantage of the first-time home buyers’ credit before it was set to expire at the end of November. 

Sales are up 23.5% since their lows in October 2008, which also is a record for year-over-year jump, according to the National Association of Realtors.

 

It seems the sales are heavily influenced by the governments incentives, so it’s hard to tell if this increase represents a bottoming out of the housing market, and now that the home buyers’ credit has been extended to April, this will remain unclear.

The median sales price of an existing home in October was $173,100, down 7.1% from October 2008. That’s the smallest drop in median home price in more than a year.

 

Home Buyer Tax Credit Extended

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The House of Representatives voted last Thursday to extend the first time homebuyer tax credit.  The bill was approved with an overwhelming 403-12 margin in Congress.  On Friday it was passed to the White House and enacted as law by president Obama.

 

Jim Gillespie, CEO of Coldwell Banker LLC, played a key role in the extension of this bill.  Gillespie and many other leaders in the real estate industry have been activists for this cause.  They have fought for almost a year now to have the bill extended, and in a email he sent out to Coldwell Banker associates he states,

“This is an historic moment for our industry as well as the culmination of more than a year’s worth of hard work and meetings with elected officials and policy makers. I want to personally thank all of you who participated in Coldwell Banker’s Legislative Week, which was the springboard for my meetings on Capitol Hill, as well as the numerous other legislative calls for action — I am both proud and appreciative of how so many of you made office visits, phone calls and e-mailed your elected officials. Combined with Realogy’s instrumental efforts on Capitol Hill, I know that our grass roots outreach to Congress and the Administration truly helped make a difference on this issue.”

 

The Senate was also commended by the National Association of Realtors for the extension.  NAR estimates that the current tax credit aided about $22 billion in home sales.

 

Bill Details:

·         Extends the present $8,000 tax credit for first-time home buyers through April 30, 2010.  

·         Current homeowners are eligible for a $6,500 tax credit through April 30, provided they have lived in the home they are selling, or have sold, as principal residence for five consecutive years in the past eight years.

·         If potential home buyers have a binding contract on or before that date, they will have until July 1 to close the transaction.  

·         Income limits for eligible home buyers are expanded to $125,000 for single buyers and $225,000 for couples.

·         The purchase price of the home cannot exceed $800,000. 

·         To help guard against fraud, buyers are required to attach documentation of purchase to their tax return.

Real Estate Experts are Lobbying for an Extension/Expansion to the Home Buyer Tax Credit

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As Many as 40% of all home buyers this year will be eligible for the $8000 tax credit.

The stimulus plan is scheduled to end in November, and it is projected to cost the federal government $15 billion.  This is two times the amount that was estimated when the bill was passed in February.

Many people are beginning to wonder if the housing market will continue to stablize without the tax credit.  Experts estimate that the tax credit helped aid several hundred thousand home sales.

The real estate industry, including the powerful 1.1 million-member National Association of Realtors, wants Congress to extend the credit at least through next summer. The group hopes to expand the program to $15,000 and to allow all buyers, not just those who have been out of the market for at least three years, to qualify.

The price tag on that plan: $50 billion to $100 billion.

Distressed Sales Help Drive Outer Banks Real Estate

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Distressed sales made up 29% of all residential properties sold in the Outer Banks in the month of July.  Distressed properties include short sales and bank owned homes.  Bank owned homes made up 20% of all sold residential homes for July. 

Distressed properties tend to push real estate values down.  An increase in distressed property sales can be viewed from a positive light because the sales demonstrate that buyers are coming back into the market, and as the distressed properties are cleared out prices can stabilize and eventually grow.

First-time Home Buyers Help Boost Home Sales

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The National Association of REALTORS reports that 50% of all homes sales for the month of March were tied to first-time home buyers.  Many of these sales were for distressed and foreclosed properties. 

 

All-time low interest rates and federal tax credits are helping build this trend.  First-time home buyers are helping clear some of the oversupplied inventory and restore the economies of states that have been hit hard by foreclosures such as Florida and California.