We’ve had high hopes that the extended tax credits for first time home buyers and new tax credit for repeat buyers would heat up the market substantially.  We have seen some degree of improvement lately- about what you’d normally see in the spring around here.  Yet, there doesn’t seem to be a lot of interest focused on the benefits of the tax credits.  I think we did get some a real boost last fall for the first round of these credits, but projections now are showing limited response to the current, and likely last, round of tax incentives for home buyers.  This is in spite of historically low mortgage interest rates and low housing prices.  Housing won’t be this affordable again for a long time.

As most understand, the future hangs mostly on the recovery of the economy and the (un)employment numbers.  We’re always hoping for a magic bullet, but this time it looks like the bullet is traveling at a donkey’s pace.

HERE is a link to a good Bloomberg Business Week article that pulls all of the variables together.

The problem is that some of those people thinking of selling their home don’t understand how home purchases and mortgages work.  That causes them to be tempted to price their home too high when they list it.  I call this the “waiting for someone to show up with more money than brains” syndrome.  Fact is, that just will delay the sale of the property, if it sells at all.  If the case of the tax credit, not selling soon enough means you’ll lose the tax credit because of the time limits.  There are two  main reasons for this.

1. Most buyers will be working with a “Buyer’s Agent,” an agent whose responsibility is to help the buyer find the best property at the best price.  No, they won’t try to jack up the sale price just to get a few more dollars in commission.  First, they have a fiduciary duty to their buyer client to help them get the best deal.  The second reason for this is tied to the point below.
2. Unless a buyer is going to make the purchase with all cash, then there is a lender involved.  If you think about it, at closing, the lender owns most of the house, with the buyer having equity equal to their down payment.  The lender sends their appraiser (who actually works on behalf of the lender. not the buyer) to appraise the value of the house relative to the local market.  If the house does not appraise at a value at or above the contract price, then the lender will refuse the loan unless the buyer is willing to make up the difference.  The lender does not want to be stuck with a big loan on a property that was over-priced, in case the borrower defaults on the loan.  So, to go back to point #1, the buyer’s agent will advise the buyer not to agree to pay too much because the lender will refuse the loan in most cases.

So, like I said, there’s just no point in listing too high.  When agents are looking at sold properties on the MLS, we can see the entire history of a property’s listing.  It is not unusual to see properties that sold 10, 15, or 20% below their original listing price, and see that the seller kept dropping the price for a year or two, always being behind the curve of price changes, until they finally got desperate and set the price in line with the market, when it then sold.  Some of them waited too late and were forced into a short sale or foreclosure.

Pricing it right with the current market will get it done and cause much less stress on the seller.  By the way, I can help you set a proper listing price based on research I do on recent sales and current competition.

I just saw a news report from the National Association of Realtors that Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development has announced that it will allow its lenders to use the $8,000 as a down payment.  This will remove a significant barrier for many buyers.  See an article written in the Realtor.org website about this HERE.  I had seen Donovan interviewed yesterday, and when asked about the possibility of extending the tax credit beyond first time home buyers, he didn’t exactly embrace it, but didn’t dismiss it either.  Obviously, that would add to the federal debt, but could also be a more effective catalyst for getting the economy going again.  If that served to reinvigorate the economy, then it would be a great investment toward getting business, and thus, tax revenues going again.

Stay tuned.

The $8,000 first time home buyer tax credit is great, but if you can’t raise the money for a down payment and closing costs, that tax credit is really not available to you.  Columnist Ken Harney published a piece last Saturday (see HERE) about several states coming up with ways to advance the $8,000 to a buyer, then be paid back when the feds sent the tax credit check.  In the meeting today, I asked Rep. Killian if he is aware of any similar work being done in the NC legislature.  I’m not sure he understood the concept, but his answer was that this was “not realistic.”  Since Mr. Harney reported that 10 states are doing it, I guess it is realistic under the right circumstances.  I communicated later with our Realtor Association Government Affairs Director, Elizabeth Barnhardt, who said she’d get the information about the other states’ work in this area to Rep. Killian.

1. House prices have come down to the lowest levels in years.  There’s some evidence that many markets are finding a bottom.
2. Morgage Rates are around 4.75% for a 30 year conventional loan or 6% for a jumbo (over $417,000).
3. USDA mortgage loans that offer no money down transactions for qualifying buyers are still available (income limits at $56,600- joint- for Iredell residents- varies by county).
4. The Federal government is providing up to $8,000 tax credits (like cash) to qualifying first time home buyers (income limits up to $75,000 single and $150,000 joint).

If you think it will get better than this, I’d not hold my breath.  This is all driven by the difficult economy and slow housing sales.  As soon as sales pick up substantially, you’ll probably see the interest rates go up and the incentives become harder to get.  Timing markets like this is next to impossible- we’ve never seen anything like it, so how do you predict the future?

If all that looks to you like an ideal situation to buy a home, let me know.  I’ll be happy to get to work finding the right home for you.

If you plan to buy your first home (or first after 3 years of renting) or know someone who’s thinking of doing it, now is the time.  You’ve got to purchase your home by November 30, 2009 to get the tax credit as things stand now.

Here is a pdf summary of the details.

Here is a much longer explanation.

Here is a look at the IRS form that you’d use to claim the tax credit.

Now, you have no excuse.  Call me, and we’ll find the right house for you!

Sandra Block of USA Today has a good column today about how to go about getting the first time homebuyer tax credit from the Feds.  See it HERE.  You may also want to review the information provided by the National Association of Realtors HERE.

Fixed 30 year mortgages are being locked in at 5% and below for buyers who have good credit and a steady income (many people do!).  This is honestly a remarkably great time to buy a home.  Even if you don’t qualify for the first time buyer tax credit, with low prices and low interest rates, it’s still a great time to buy.  Want to do this but still need to sell your house, do it!  Price it right, get it sold, then buy another house where the sellers have reduced their price.  This won’t last forever, you know;-)

Here is a link to the NAR site which will download a 25  Frequently Asked Questions document that should answer most of your questions about the new tax credit.  Remember that you should consults a tax professional for interpretation of many situations, and I understand that all the details will not be available until March 4.

1- Even if you’ve already filed taxes for 2008, if you buy a house by the end of the year, you can file an amended return to get the up to $8,000 tax credit.  If that results in a refund, you’ll be able to go ahead and get that.

2- There had been a limit imposed by Fannie Mae to limit mortgages to investors to just 4 properties.  At one time the limit was 10 properties.  Now, they’ve brought the limit back to 10.  The great thing about this is that sales to investors is one of the best ways to quickly reduce the amount of houses in inventory and cut down on foreclosures.  It also enables investors to spread their cash flow risk over up to 10 properties rather than just 4.  That’s important in terms of the effect of losing a renter at any particular time.  Todd Long is our Broker-in-Charge and an investor himself.  Here’s his more involved writeup on this subject.

More to come as I discover it.