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May 4, 2011

No. 1 reason to buy a home? For some last year, it was tax credit

Thirteen percent of first-time homebuyers surveyed by the National Association of Realtors last year said their primary reason for purchasing -- primary reason, mind you -- was the $8,000 federal tax credit.

That was the second most popular answer after "I wanted to own my own home," though that more traditional reason was far and away the top choice at 53 percent.

Third most popular answer: "affordability of homes," which was the top pick for 8 percent of first-time buyers surveyed.

The trade group's survey results have been out for a while -- and the questionnaire itself was mailed out last July to buyers who purchased between July 2009 and June 2010 -- but hey, I just stumbled across it. I thought you might like to chew over the figures, too. Is it alarming that anyone took on the responsibility of homeownership primarily for an $8,000 tax break ... or, considering the multi-billion-dollar cost of that incentive, that just 13 percent did?

For repeat buyers, the tax credit on offer was $6,500, but only assuming they met the very specific qualifications. It wasn't nearly as popular as the credit for first-time buyers, and the survey results reflect that: Just 3 percent of repeat buyers cited the credit as the primary factor for their purchase. Desire for a larger place was the key motivator.

If you bought -- or sold -- in the last few years, share: What was your primary reason? What about the secondary and tertiary ones?

Posted by Jamie Smith Hopkins at 6:00 AM | | Comments (6)
Categories: First-time buyer tax credit
        

April 12, 2011

March home sales, prices drop in Baltimore area

March10housingmarket.jpg

 

That roller coaster pictured above is the last year of the housing market in the Baltimore metro area, at a glance.

In blue -- the figure with the huge swoops and swoons -- is the year-over-year change in the number of homes sold, according to Metropolitan Regional Information Systems' stats arm. In red is the year-over-year change in the average home sale price.

The federal first-time homebuyer tax credit is what drove the number of home sales up, and then down, last year. Buyers rushed to beat the deadline (contract signed by April, closing by June -- later pushed back to September). And at least some of them were people who would otherwise have bought later in the year.

Sales began to rise again in December, but new numbers for March show we're back in declining territory year-over-year. Probably not a tremendous shock, since we're now (and for the next few months will be) comparing against the height of the 2010 tax-credit boost. The April 2010 bump was particularly large, nearly 40 percent.

Even when the tax credit was in effect, however, market activity wasn't back to normal for the region. About 1,960 homes changed hands in the metro area in March 2010. That's 100 more than this March and 330 more than March 2009, but it's less than all the previous Marches in the last decade.

In March 2000, when fewer people lived in the area, more than 2,370 homes changed hands.

Here's the news story about March home sales, complete with an anecdote about a Baltimore County home seller who found people were more interested in his house when he offered to throw in a '93 Taurus (with low mileage) as a freebie.

September 17, 2010

Repaying homebuyer tax credits

If you're among the more than 950,000 Americans who claimed the 2008 homebuyer tax credit, you're on the hook to begin paying it back next year. It's really a no-interest loan. Only in 2009 did it morph into the $8,000 incentive buyers can keep.

But the Treasury Inspector General for Tax Administration is warning that some who claimed the credit for 2009 purchases could wrongly get repayment notices because the IRS has the date incorrectly listed as 2008 in its records. Other '09 purchases were recorded by the IRS with no date.

The treasury inspector found about 60,000 such examples when it audited the IRS. (Insert your audit jokes here.)

Meanwhile, about 9,100 tax-credit claims worth more than $30 million involve buyers who purchased in 2008 but were "incorrectly recorded as 2009 or the year was not recorded," the audit report says.

Continue reading "Repaying homebuyer tax credits" »

September 10, 2010

Declines in pending home sales -- and some increases

While we're waiting for August home sale numbers, have one more bite from the July apple.

The number of contracts signed that month, deals that will turn into settlements if all goes well, slumped precipitously in most of Maryland. A dozen counties and Baltimore City saw double-digit declines, including a 38 percent drop in Dorchester (from 34 contracts a year ago to 21 in July) and a 26 percent decrease in Carroll (from 161 a year ago to 119).

Cue the "we told you so" from economists, who predicted that buyers would rush to sign contracts in time to qualify for the federal homebuyer tax credit, leaving sales to drop off afterward.

But buyers in four counties actually picked up the pace in July compared with a year earlier. Here's where:

Continue reading "Declines in pending home sales -- and some increases" »

September 8, 2010

Homebuyer tax credits claimed so far: $23.5 billion

About 3.3 million Americans have claimed federal homebuyer tax credits so far -- $23.5 billion in all, including the 2008 incentive that must be paid back.

In Maryland, about 57,000 buyers have claimed $410 million in credits. That accounts for practically half the 120,000 homes sold through the multiple-listing service in Maryland from April 2008 -- when the program kicked off -- through July. (This assumes, of course, that each claim accounts for one home. There are legal and illegal reasons why it might not be one-to-one.)

The credit statistics, released by the U.S. Government Accountability Office, are a tally of claims made through the beginning of July. So it's not the grand total yet, but it offers an intriguing snapshot of the credit's popularity and cost.

For instance: There might be a whole lot more homeowners than prospective first-time buyers, but many more first-timers got the $8,000 incentive than repeat buyers opting for the $6,500 credit. About 200,000 Americans claimed the smaller credit since it was made available in November, compared with about 400,000 who got the first-time buyer credit during the same period.

It was even more stark a difference in Maryland, the GAO says.

Continue reading "Homebuyer tax credits claimed so far: $23.5 billion" »

August 31, 2010

Calls begin for another home buyer tax credit

As home sales plummet, some folks want the federal home buyer tax credit -- like hope -- to spring eternal.

Florida's governor, who is running for the Senate, told CNN another credit "would help enormously." Another Senate candidate in the hard-hit Sunshine state said he's in favor of a reboot, too. They were reacting to comments on the same CNN show from a federal housing official, who prompted much twittering simply by not declaring, "Read my lips -- no new credits."

After telling CNN that "it's too early to say after one month of numbers whether the tax credit will be revived or not," HUD Secretary Shaun Donovan said: "All I can tell you is that we are watching very carefully. ... We are going to go everywhere we can to make sure this market stabilizes and recovers." 

If you're in favor of another credit, don't uncork the champagne yet. Nick Timiraos with The Wall Street Journal sees in Donovan's comments an attempt to sidestep -- "awkwardly" -- a reporter's question about tax-credit revival.

"There’s been a lot of breathless speculation ever since," Timiraos writes.

Continue reading "Calls begin for another home buyer tax credit" »

Posted by Jamie Smith Hopkins at 7:00 AM | | Comments (14)
Categories: First-time buyer tax credit
        

August 11, 2010

July home sales in the Baltimore area

HomeSalesChangeJuly10.jpg

 

If you've been wondering what the housing market looks like at a glance, take a gander at the chart above. It shows the year-over-year change in home sales in the Baltimore metro area, and you can really see how the first-time home buyer tax credit influenced buyer activity.

The big swoop upward in October and November came as buyers thought they had to close by Nov. 30, a deadline that was extended to June 30.

That too was extended, though only at the last minute and only for buyers who had signed contracts by April 30 but were still wending their way through the closing process. Result: a July falloff in sales.

In case you're wondering, home sales in the metro area were in decline year-over-year from October 2005 until June 2009, with one little blip upward in January 2007. So the pickup in the middle of 2009 does seem tax-credit driven.

Interested in a closer look at July? Check out my home-sales story.

Wonk reader Frank Rizzo was curious to know how sales looked from a month-to-month perspective, rather than year-over-year. Here's that chart, which like the one above relies on Metropolitan Regional Information Systems data:

Continue reading "July home sales in the Baltimore area" »

Posted by Jamie Smith Hopkins at 12:01 AM | | Comments (2)
Categories: First-time buyer tax credit, Housing stats
        

July 2, 2010

Drop in pending home sales: Baltimore vs. U.S.

File this under "d" for "duh" -- buyers across the country reacted to the lack of $8,000 federal tax credits for home sales in May by signing fewer contracts. Not exactly a stunning development. But the new figures do allow us to compare and contrast: us vs. U.S.

Nationally, pending sales fell about 16 percent vs. a year earlier, when the first-time home buyer tax credit was in effect. In the Baltimore metro area, the drop was 32 percent -- twice as steep.

It's a similar story comparing May to April, when buyers were rushing to beat the contract-signing deadline. The national decrease was 33 percent. Ours: 53 percent. (For the wonks out there: These numbers are not seasonally adjusted. Also, no statistics were harmed in the calculation of these figures.)

The question that only time will answer, but about which housing-market watchers are happy to put in their two cents now, is whether the contract slump is temporary. If people bought homes in April rather than May or June, then you'd expect to see more activity in July. But if people bought homes in April rather than the rest of the year and 2011 besides ...

Add the uncertain economy, mix in foreclosures, and you have a hard-to-predict brew.

So here's my question to you (OK, questions): What are you seeing out there? Is it easier to negotiate down asking prices? What competition are you buyers seeing, if any? Are you sellers getting showings?

What does the market feel like compared with April?

June 30, 2010

Home buyer tax credit closing deadline: Sept. 30

The Senate has passed a measure to extend the closing deadline for the home buyer tax credit to Sept. 30, which means it's now headed for a presidential signature.

Dow Jones Newswires reports that senators decided to separate the tax credit extension -- popular with elected officials -- from the more contentious proposed extension of unemployment benefits. The Senate approved the tax-credit grace period unanimously.

That bill is a twin of the one passed by the House on Tuesday.

I haven't heard any rumblings that President Obama is inclined to veto a tax-credit extension, so it looks like all you buyers tied up with long-running short sales, paperwork problems and the like have another three months to close your deals.

A reminder: This does not give more time to folks still looking. The deadline to get under contract for a home was April 30.

UPDATE: The National Association of Realtors says, "There will be no gap between June 30 and the date the president signs the bill into law." Just in case you were wondering.

Posted by Jamie Smith Hopkins at 11:34 PM | | Comments (15)
Categories: First-time buyer tax credit
        

Update on home buyer tax credit extension

Here's how the Senate is planning on extending the home buyer tax credit -- by combining it with a bill to extend unemployment insurance. As the Associated Press notes, "The homebuyer tax credit is a much easier sell."

More here and here.

Posted by Jamie Smith Hopkins at 10:45 AM | | Comments (23)
Categories: First-time buyer tax credit
        

June 29, 2010

House takes up home buyer tax credit extension

The deadline extension for the home buyer tax credit might not be dead after all.

Several members of Congress -- including U.S. Rep. Frank Kratovil of Maryland -- introduced a bill in the House today to give buyers three more months to close on deals struck by April 30. The current deadline is tomorrow night.

Lucien Salvant, a spokesman for the National Association of Realtors, said the proposed Homebuyers Assistance and Improvement Act seems to have "a good chance of passing" in the House and he's hopeful it will happen today. The Senate could take it up tomorrow, he said.

The Senate, if you'll recall, supported an amendment to extend the closing deadline to Sept. 30 but attached it to a bill with a lot of other measures that did not have broad support. That bill died last week. This House version only extends the tax credit closing deadline and does nothing else, Salvant said.

This week the Realtors group estimated the number of deals that aren't going to close in time for the June 30 deadline. It's still going with up to 180,000 nationally but also broke it down by state. Buyers in Maryland, it said, would miss the deadline on about 2,630 sales. 

UPDATE at 5 p.m.: The House voted in favor of the bill this afternoon. The National Association of Realtors says it's on the way to the Senate now.

Posted by Jamie Smith Hopkins at 3:33 PM | | Comments (8)
Categories: First-time buyer tax credit
        

June 27, 2010

Poll: Home buyer tax credit extension -- yes or no?

Most of your chatter here in the last few days has been about the as-of-yet failed attempt by the Senate to extend the closing deadline for the home buyer tax credit. Those caught up in loan, title, short-sale or other tangles really want more time. Those upset about the money doled out already want the credit to end June 30, a date that was itself an extension.

Sounds like a poll, don't you think?

Here's a sample of the pro- and anti-extension commentary:

Continue reading "Poll: Home buyer tax credit extension -- yes or no?" »

June 25, 2010

Home buyer tax credit extension bill fails

The grab-bag bill many home buyers have been on tenterhooks about -- because it had an amendment extending the closing deadline for the $8,000 federal tax credit -- is officially dead.

Supporters in the Senate have given up trying to pass the American Jobs and Closing Tax Loopholes Act, so the deadline to settle on a tax-credit deals remains June 30. The Senate had approved an amendment to the bill that would had tacked on an extra three months for the estimated 100,000-plus buyers who are still waiting for paperwork to go through.

Lucien Salvant, a spokesman for the National Association of Realtors, said the measure might still come to be through another bill. But with just a few days left, "it's coming right down to the wire."

"The anxiety level among home buyers who have to wait to close ... is very high," he said.

If Congress decides to pass an extension in, say, July and make it retroactive, some of these deals might have already fallen apart in the meantime, Salvant noted. 

 

June 24, 2010

Home buyer tax credits for prisoners

Did you hear the one about the 1,300 people behind bars who claimed the first-time home buyer tax credit?

Or the single home claimed for credit purposes by 67 people?

They sound like setups for a joke, but they're sadly real.

Both are among the scams the Treasury Department's inspector general for tax administration turned up. His report noted more than 14,000 wrongly claimed home buyer tax credits, for a grand total topping $26 million.

On the upside, the Internal Revenue Service tells the Associated Press, that's pocket change compared with the total claimed through April -- $18.7 billion. The IRS says it's going after the tax cheats to get the money back.

Posted by Jamie Smith Hopkins at 7:00 AM | | Comments (0)
Categories: First-time buyer tax credit
        

June 22, 2010

In danger of missing the June 30 homebuyer tax credit deadline?

The National Association of Realtors says as many as 180,000 people nationwide could miss out on the homebuyer tax credit if the June 30 deadline to close isn't extended. Naturally, I'm curious to know how many Baltimore-area folks are in that position.

Is this you? What's your situation? How much does it matter if you get the money?

Divorce and the home buyer tax credit

A Consuming Interests reader wanted to know if he'll have to pay back half the first-time home buyer tax credit money now that his wife has filed for divorce. Intrepid reporter Liz Kay asked the Internal Revenue Service for an answer. You'll find it here.

Columnist Eileen Ambrose, meanwhile, writes about buyers getting denied the credit because their situations are so complex. 

Home buyer tax credit extension up in the air

Some of you are waiting on tenterhooks to hear if Congress will allow homebuyers more time to close on deals signed by April 30 with the expectation of a $6,500 or $8,000 tax credit, so I checked in with the National Association of Realtors for an update.

Trouble is, the amendment the Senate approved last week -- which would push the June 30 closing deadline to Sept. 30 -- is attached to a bill that is far from a sure thing.

The American Jobs and Closing Tax Loopholes Act "is a Christmas tree, it’s got everything in it, all kinds of stuff, and it looks like that bill is going to have a really tough time to be moved in the Senate," said Lucien Salvant, a spokesman for the Realtors group.

Continue reading "Home buyer tax credit extension up in the air" »

June 17, 2010

Possible home buyer tax credit extension

Congress is thinking about extending the home buyer tax credit -- not the deadline to sign a contract, but the June 30 deadline to close on the deal.

If you're worried you're not going to get to the settlement table in time, the thought of three extra months will probably come as a joyous relief. (If you're a non-buyer irked at all the taxpayer money Uncle Sam is handing out, on the other hand, you were probably hoping many deals wouldn't close. I do recall a few reader comments to that effect.)

The Senate voted Wednesday to move the closing deadline for the $8,000 and $6,500 credits to Sept. 30, so the proposal is already moving through the system.

Walter Molony, a spokesman for the National Association of Realtors, said his trade group estimates that about 180,000 buyers are likely to miss the June 30 deadline "because of delays in the process." That's particularly true of short sales, he noted.

Are you still trying to close on a tax credit deal? Do you think you'll manage it by the current June 30 deadline?

June 4, 2010

New-home sales after the home buyer tax credit

Another postcard from May, the first month sans the first-time home buyer tax credit:

Metrostudy, which does market research for the home building industry, says early figures show a big falloff in new-home contracts signed in May in once-bubbly markets such as Las Vegas.

But not here.

Kenneth Wenhold, director of the Mid-Atlantic region for Metrostudy, said numbers for the Baltimore-Washington area suggest "traffic and contracts per project has changed very little from April to May, implying that we should not have a significant 'hangover' from the tax credit expiration."

"On average, traffic and contracts are trending similarly to what we saw during this time of year in 2009, resulting in a conversion ratio which is also on par with 2009," he wrote in an email.

About a week into May, Crofton-based homebuilder Caruso Homes told me it was seeing a pop in sales after the tax credit. People who'd just sold their homes were looking to close on a new place quickly.

May contract numbers for resales (and any new homes on the multiple-listing service) will be released next Thursday, so we'll see how the wider market fared.

Some of you shared what you've noticed in your community:

Continue reading "New-home sales after the home buyer tax credit" »

June 3, 2010

Early signals about the effect of the now-ended home buyer credit

Mortgage applications are continuing to show the impact of life A.T.C. -- After the Tax Credit, specifically the $8,000 incentive for first-time home buyers and the $6,500 incentive for repeat buyers.

"Purchase applications are now almost 40 percent below their level four weeks ago," Michael Fratantoni, vice president of research and economics at the Mortgage Bankers Association, said in a statement Wednesday.

People wanting to refinance accounted for nearly three-quarters of the mortgage applications in the last full week of May.

Mark Vitner, a senior economist with Wells Fargo, wrote in a report last week that the numbers -- which had already fallen significantly at that point -- seemed to be sending a message:

"The slide in purchase applications has been sharper and more immediate than it was last fall, suggesting the pullback in sales and new construction could be greater than many currently expect," he wrote. "Purchase applications have tumbled a cumulative 36.3 percent over the past three weeks, falling to their lowest level since 1997. By contrast, purchase applications fell around 34 percent last fall."

Vitner's forecast: a "modest recovery gradually taking hold during the latter part of this year" in terms of housing starts, but home prices falling "a little further over the course of 2010, with a bottom being reached in either late 2010 or early 2011."

The mortgage stats and Vitner's thoughts are both national, not local. What's your local perspective? What strikes you as good measures of the expired-tax-credit effect?

Next week, we'll see one useful stat -- how many buyers signed contracts on homes in the Baltimore metro area in May. That will be part of Metropolitan Regional Information Systems' report on multiple-listing service activity.

May 22, 2010

Tax-credit deadline passes, mortgage applications swoon

You didn't need to wait long for a sign of what the end of the home buyer tax credit program means: Mortgage applications by buyers fell 27 percent last week -- following a 10 percent drop the week before -- to their lowest level in 13 years.

"The data continue to suggest that the tax credit pulled sales into April at the expense of the remainder of the spring buying season," Michael Fratantoni, the Mortgage Bankers Association's vice president of research and economics, said in a statement this week.

It's been mostly downhill for new-purchase mortgage applications since 2005, as this chart shows, but the figures did spike last fall (when the credit was originally set to expire) and again more recently.

Refinance applications did rise nearly 15 percent last week as homeowners tried to take advantage of dropping mortgage rates. (Refi requests accounted for two-thirds of all applications.) The average interest rate for a 30-year fixed rate mortgage was about 4.8 percent that week.

As columnist Eileen Ambrose notes, experts are thanking/blaming fears about financial instability in Greece for the low U.S. mortgage rates. Investors, seeing U.S. Treasuries as a safer bet than European debt, are parking their money there, "and the demand pushed down long-term interest rates that influence the 30-year fixed rate mortgage," Ambrose writes.

Financial publisher HSH Associates says the downward trend has continued: "After setting 2010 lows last week, mortgage rates managed another downshift this week and are once again near historic -- approximately 50-year -- lows."

Any deep thoughts to share on rates or the pipeline of future buyers?

May 16, 2010

The home buyer tax credit effect

I'm sure this wouldn't be true of a scientific poll given to truly random people, but more than 80 percent of you Wonk readers say the home buyer tax credit had some impact on you.

The most popular answer: "I tried to buy before the deadline but couldn't because so many others had the same idea." (One in four people said that applied to them.)

Next, with 21 percent of the vote, were the folks who got the credit already or qualified and will be getting it.

Seventeen percent of you said you've been purposely waiting to buy until after the credit expired.

No homeowner said they've been purposely waiting to sell, but 12 percent picked this option: "I tried to sell before the deadline but wasn't able to."

Only a small handful said they sold to a buyer getting the credit, including those who turned around and got the $6,500 repeat-buyer credit. (A lot more first-time buyers took the poll than sellers.)

About 19 percent of polled folks said the credit had absolutely no effect on them.

Of course, I forgot to include another option: "Sure, it's having an effect on me -- it's having an effect on us all because that's taxpayer money they're handing out." Sorry about that. An answer along those lines was a fairly popular choice in an earlier poll.

While we're on the subject of the tax credit: Kenneth Harney had a recent column warning folks not to blithely assume that closing by June 30 -- as the credit requires -- will be no sweat. He lists things you'll want to keep in mind, including this recommendation:

Jay Delmont, vice president of Freedmont Mortgage in Hunt Valley, Md., said home buyers who seriously want to close in time need to get the process moving with lenders immediately to avoid the late-June crush. The "main concern," Delmont said, "is that a lot of contracts are being written for a June 28-30 settlement and people need to schedule a slot" with title or escrow agencies as early as possible.

May 11, 2010

April home sales in the Baltimore area

Home sales up -- and prices too. That's something rarely seen in the same month in the Baltimore metro area for the past, oh, four years, and it happened in April as buyers rushed to get both feet in the door before the home buyer tax credit expired.

You know how investment firms warn that "past performance is no guarantee of future results"? The April housing market is that times 10, because you can't expect things to look the same on either side of a deadline for up to $8,000 in cash from Uncle Sam.

But it was certainly an interesting month. A few stats from Metropolitan Regional Information Systems:

Home sales in the metro area jumped 35 percent from a year ago.

Newly signed contracts -- future sales, if they close as planned -- ratcheted up about 50 percent.

Average sale prices inched up not quite 1 percent in the region, ranging from a 2 percent drop in Anne Arundel and Baltimore counties to double-digit increases in Baltimore City and Carroll County.

Newly listed homes for sale in April topped 6,000, the most since the spring months of 2007 -- a sign that buyers weren't the only ones motivated by the deadline.

Read more in today's story, which includes a home builder with an interesting week after the deadline and a seller with unfortunate timing. (Bought a rowhouse to rehab, put it on the market in 2007 -- still waiting.)

May 9, 2010

Lots of you want the home buyer tax credit back

I suspect a lot of people who tried to buy a home by April 30 -- but couldn't -- have stopped by this blog recently. Nearly 70 percent of the folks who took this poll about the home buyer tax credit wish Congress would extend it again.

The second most popular answer, with 14 percent of the vote, was: "I wish it was never approved to begin with."

About 9 percent thought April 30 was the right time for the credit to end, 6 percent wish it had ended months ago and the remaining handful really don't care one way or another.

Reader M.R. is among those sorry that the credit expired. "In the past 3 years I got my credit score ... up over 100 points but with so many people making offers right now, once I finally got a loan approval, it was basically too late," M.R. wrote. "It does kind of suck watching everyone I know take advantage of the credit and to know I did everything I could but I wasn't able to get it."

Darwin Rules -- who thinks home prices still have a long way to fall -- suspects M.R. will be better off for waiting. "An $8K tax credit will look like peanuts compared to what you will save in another 12-18 months."

I polled you because I knew there were strong feelings on both sides of the issue, not because I think an extension is likely. The key proponent of the extension last fall was Sen. Johnny Isakson, and his office reiterated on April 30 that he's not in favor of another round.

Here's a follow-up poll for curiosity's sake:

May 3, 2010

The last-minute rush for the home buyer tax credit

In case you missed it over the weekend: A Brooklyn Park resident trying to purchase a home before the first-time home buyer tax credit expired let me tag along with her on Friday as she looked at her final choices.

You can read the story -- with all the deadline drama -- right here. Above is videographer extraordinaire Christopher Assaf's take on part of the day.

On the flip side of the Friday rush were potential buyers who decided to wait until after the credit expired to seriously look. Mike Fowler, 26, is in that group. I chatted with him in the credit's waning days.

"My main reason for waiting is that I need to save more," said Fowler, who works at Baltimore-based T. Rowe Price. "I've got money saved, but not enough to put a sizable down payment down."

His secondary reason: He suspects the tax credit "is delaying the inevitable decline in prices," and he'll get a better deal later.

"I do think the credit was a good thing initially because at that time, our whole economy was collapsing," Fowler said. But the extension? Not so much. He figures the pool of buyers will shrink now, "and then sellers are going to be sitting with these inflated listing prices."

That's his best guess, anyway -- he hastens to point out that he's not a housing professional. But all of us, pros and amateurs alike, will find out soon enough what a post-credit market looks like.

May 2, 2010

First-time home buyer tax credit over at the right time?

The debate some of you readers have been having here (and here) about the first-time home buyer tax credit is, in part, about timing. Too soon to expire or good riddance to bad tax policy?

Don, who's trying to buy in San Diego, says the lure of the tax credit encouraged buyers to up their offers so "that $8000 is really given to the sellers (and banks!)" He's glad it's over.

Joanne, another buyer, had the same bidding-war experience but is of a different mind about the credit. "I would rather see the tax credit extended as to see the government give more welfare to those that sit and not work and expect a handout," she commented.

So, here, let's make it a poll: Was the credit expiration well-timed?

A few notable stats:

Homebuyer tax credits claimed by Americans through the middle of February for purchases in 2008 and 2009: 1,795,429

Value of those credits: $12.7 billion

Number of credits claimed by Maryland residents: 29,298

Value of those credits: $206.5 million

May 1, 2010

Senator: Don't expect a home buyer tax credit extension

Several of you commented yesterday that you hope April 30 doesn't actually prove to be the end of the $8,000 (and $6,500) home buyer tax credits -- that Congress will decide to start the bandwagon rolling again.

"I had 2 homes snatched from me with in the last 2 days," Oscar wrote. "I really hope it gets extended!!"

"I hope they extend the house tax credit as well," Jennifer commented. "I had four houses snatched from my husband and I. In my city, it is has been bidding wars. It has been also difficult to find a good realtor!"

Sen. Johnny Isakson, a Georgia Republican, was the most visible proponent of extension last fall. So as your pleas came my way Friday, I checked in with his office to ask if there was any chance of another round.

Answer: nope. Which didn't surprise me, since he'd vowed on the Senate floor in November that no more extensions would be forthcoming.

"He ... said that part of the benefit of a tax credit like this is an expiration date -- knowing it's not going to go on forever," said his spokeswoman, Sheridan Watson.

Wonk reader miss clavel thinks that's just as well -- for buyers. Here's her comment:

For those having homes "snatched" from them, who want the credit extended; think again.

It may be the credit which is causing the homes to sell so quickly, as other buyers rush to take advantage of the credit.

I almost rushed into what was not really the best home for me.

It is also possible that the credit is pushing prices up (good for the seller but not the buyer).

Personally, I would rather NOT see the credit extended.

April 30, 2010

Last day for the first-time home buyer tax credit

The two-year-old federal tax incentive credited with a spike in home buying -- and tax fraud -- is scheduled to end tonight.

You have until the end of the day to sign a binding contract if you hope to qualify for the $8,000 credit for first-time home buyers. (There's a second deadline for the settlement itself, which must happen by the end of June.)

A $6,500 credit for certain repeat home buyers, added to the program when it was extended in November, also phases out today.

A number of local buyers have only just gotten under contract, agents report.

"Everyone I’ve been talking to is saying they've been super busy," said Joseph T. "Jody" Landers III, executive vice president of the Greater Baltimore Board of Realtors.

The first-timer incentive, passed in July 2008, started as a $7,500 credit (retroactive to April purchases) and was actually a no-interest loan: Buyers had to repay the money over 15 years. The reaction was tepid.

In February 2009, Congress turned it into an $8,000 housewarming gift from Uncle Sam -- no repayment needed as long as you kept the place as your primary residence for at least three years. (The sweeter incentive was made retroactive to purchases in January.)

It's fully refundable, "meaning the credit will be paid out to eligible taxpayers, even if they owe no tax," as the IRS notes.

Supporters called the credit a necessary stimulant for a housing market that had helped topple the economy and was one of the anchors preventing USS Recovery from sailing off. Detractors said it was a big expense and stole buyers from the future to handle today's problems.

Continue reading "Last day for the first-time home buyer tax credit" »

April 26, 2010

Home buyer tax credit set to expire this week

If you're trying to get the $8,000 first-time home buyer tax credit or the $6,500 credit for certain repeat buyers, this shouldn't be news to you: Your deadline is Friday. That's the last day you can enter into a binding contract, as the IRS puts it, and still qualify.

That's not the only thing you'll need to do to qualify, naturally. You can peruse the list on the IRS site, or read some frequently asked questions here.

I'm interested in hearing from buyers in Baltimore and 'burbs who are trying to get under contract before the credit clock runs out. (And, for that matter, anyone purposely waiting until afterward to look.) You can send me an email at jamie.smith.hopkins(at)baltsun.com.

April 13, 2010

Home buyer tax credit deadline approaches

There were loud calls from the real estate industry to extend the $8,000 first-time home buyer tax credit when the original Nov. 30 deadline neared. Now we're in shouting distance of the extended deadline -- April 30 to sign a contract -- and it's been pretty quiet. The National Association of Realtors, for instance, tells me it hasn't been lobbying for a re-extension.

But mortgage publisher HSH Associates notes that most of the people taking a poll on its blog "overwhelmingly support" more time. As of 10 p.m. Monday, 84 percent said they were "depending on" an extension.

HSH notes a quote from economist Robert Shiller (of Case-Shiller fame) in a New York Times story about the credit:

"You don't make drug addicts go cold turkey," Mr. Shiller said. "The credit interferes with the market in an arbitrary way, but ending it now would be psychologically powerful. People will be in a bad mood about buying a house." He advocates phasing it out gradually.

Not all home buyers will be sorry to see the credit go -- whenever that may be. Wonk reader Jelena, for instance, offered up an example of market interference:

"In the past few weeks I've been observing a peculiar trend in AA and HO counties in the below 400K segment," Jelena wrote in a comment. "Many new listings are coming up that already were for sale a year ago but did not sell. And the prices are around Zestimate or even higher. It seems the sellers expect the buyers will scoop up anything because of the looming tax credit expiration date. Sadly, they're frequently right - quite a few homes are being sold above their true value."

What do you think: Should the credit be extended or no?

March 21, 2010

Home buyer credit: effective or not?

Since the federal home buyer tax credit was extended and expanded in November, has it (a) been the major driver of the market or (b) had precious little effect?

You'd think experts could agree on this one, but I keep hearing both answers.

The Federal Reserve's March 3 Beige Book, for instance, says most parts of the country "attributed stronger home sales to the home-buyer tax credit, with several contacts apprehensive about future sales once the credit expires on April 30." And many of the Baltimore-area real estate agents I've talked to say lots of their buyers are first-timers eligible for the $8,000 credit.

But a Citigroup analyst following Pulte Homes says the extended credit hasn't done much for the builder's sales, the Associated Press reports. And mortgage giant Fannie Mae says the extension has been more bust than boom because many first-time buyers bought last year, though it does expect a flurry of last-minute purchases.

The Wall Street Journal, reporting on Fannie Mae's credit musings, says the financier considers the $6,500 credit for repeat home buyers a definite flop -- it's not a big enough incentive, "given that current homeowners generally must incur commission costs to sell their current homes, a cost not incurred by first-time home buyers."

I've sure answered a lot of questions from people hoping to qualify for the $6,500 repeat-buyer credit, but I don't recall anyone saying the money was the push they needed to buy. Anyone? Bueller?

Either way, I'm curious what you think of the overall tax-credit program. Is it having an effect?

March 3, 2010

A timeline for home buyers who want the tax credit

Intending to snag the $8,000 tax credit for first-time buyers or the $6,500 credit for repeat buyers? If you haven't done anything except think about what you'd do with the dough, Realtor.com -- the official site of the National Association of Realtors -- suggests you get a move on.

You have through April 30 to sign a binding contract and can wait until June 30 to close the deal. But that's less than two months left to get pre-qualified for a mortgage and find a good place.

Now, far be it from me to tell you when you should buy. Buy now, later or never, whatever suits you. But here's the timeline Realtor.com recommends if you want the tax credit and would like to avoid squeaking in at the last minute.

Continue reading "A timeline for home buyers who want the tax credit" »

February 24, 2010

Home buyer tax credit questions answered

Many of you have come here to ask questions about the $8,000 first-time home buyer tax credit and the $6,500 credit for repeat buyers. Many, many, many of you. In the interest of saving us all time, here are some of the frequent questions and their answers:

Q. How long do I have before the credits are due to expire?

You'll need to sign a contract no later than April 30 and close no later than June 30.

Q. How much money are we talking about?

It's a maximum of $8,000 for first-timers and $6,500 for repeat buyers. You get 10 percent of your purchase price up to that amount.

Q. What's the definition of a first-time buyer? A repeat buyer?

A first-time buyer, for the purposes of the eight grand, is someone who hasn't owned a primary residence for at least three years. Married couples trying to get this credit must BOTH qualify as first-timers.

A repeat buyer is someone who has owned (and lived in) a home for at least five consecutive years of the past eight, as measured backward from the purchase of the new digs. Married couples trying to get the $6,500 repeat-buyer credit must BOTH meet the timeline test. 

Q. What if I'll hit five years of ownership after April 30 but before June 30? Would I qualify?

Continue reading "Home buyer tax credit questions answered" »

January 24, 2010

Not waiting for the homebuyer tax credit

Some of you have been waiting a long time for your $8,000 incentive from Uncle Sam to become a first-time homebuyer. But others report that the tax-credit money arrived speedily, or at least speedy-ish.

Wonk reader Derek reports that his refund check showed up in four weeks flat. "No problems whatsoever," he said.

Pete and Julie, who each bought in June -- separately, not together -- also each got their money in 10 to 12 weeks though they filed at different times.

Julie filed in November and received her $8,000 last week. "My check also included interest!" she commented. Pete, who got his paperwork in "days after closing," also received interest. It makes sense, he said, because he was amending the 2008 return he filed earlier in the year.

Andy said he filed at the end of July, got a letter in August asking for his HUD-1 statement (proof of purchase, essentially) and received the check in the middle of October. The interest added up to more than $100.

January 22, 2010

Waiting for the homebuyer credit

Some of you have noted that it's taking a very long time to actually get the $8,000 you expected when you bought a home last year.

Linn wrote earlier this month, "This is a FYI to the people wondering about the IRS' time line. I bought a house in June of 2009 and the IRS received all of my paperwork for the credit on July 6th. It is now Jan. 6th and I still don't have my $8k. The IRS took 6 months to mail me a letter stating they wanted more information to prove I live at my new house. I understand the IRS wanting to prove that people are first time homeowners but having to wait 6 months to get a letter is a little frustrating. And yes, I did call the IRS almost every week to check on its status. At least I'm not depending on the money, although it would be nice to have it. I feel bad for anyone that is depending on it and they have to wait forever."

Michael said he's in the same situation, except he filed even earlier -- the end of May.

Linn posted an update last week to say that the IRS confirmed it received the extra documents but expects it will take 60 to 90 days to decide whether to approve the claim, deny it or ... ask for more documents. Linn wonders, in a sort of tongue-in-cheek way, whether to apply for the credit again on the 2009 tax forms and see what happens. (I'm guessing the IRS won't get the joke, what with all the non-tongue-in-cheek fraud it's had on the first-time buyer tax credit.)

So: How long can you expect to wait if you are applying for the credit on your '09 taxes? Eileen Ambrose notes on the Sun's Consuming Interests blog that the IRS is saying the earliest you can expect it -- if you file toot sweet -- is the end of March. She also has details on what documents the IRS is requiring.

January 6, 2010

Q&A: Homeownership incentives, and what they mean for renters

Years of efforts by Democrats and Republicans alike to promote homeownership for everyone have come in for their share of criticism in these post-bubble days, now that we've seen what can happen when no attention is given to whether prospective buyers are financially ready or the loans they're getting are reasonable for their life situations.

Paula M. Cino, director of energy and environmental policy at the National Multi Housing Council, a trade group for the apartment industry, has strong opinions on the topic, as you might imagine. I asked her to share in a Q&A.

Q. How does government support for homeownership compare with government support for renting?

Cino: Federal homeownership subsidies outnumber rental support 4 to 1 or about $230 billion to the renters’ $60 billion. If subsidies were adjusted to reflect the true distribution of households that rent vs. own, rental housing subsidies would have to increase by about $36 billion. The unbalanced nature of our housing policy is even more obvious when you consider that the richest 20 percent of the population claimed more than a third of the homeownership subsidies through the mortgage interest deduction.

Q. Why does it matter if the government offers more breaks and incentives for homeownership?

Cino: The current allocations simply don’t reflect the diversity of housing needs nationwide. One third of all Americans rent their housing. Moreover, changing demographics and consumer preferences show an increased demand for apartments. The U.S. Census Bureau’s Housing Vacancy Survey shows that 2.83 million new renter households were created between 2004 and 2008. In 2008 alone, 63 percent of net new households were renter-occupied.

For decades, married couples with children dominated housing markets. But today those families make up less than 25 percent of all households. Apartments are needed to accommodate the growing number of young professionals, empty-nesters and childless couples seeking smaller, centrally-located, more affordable homes that don’t necessitate a long-term financial commitment.

Q. What role do you think government policy played in the housing bubble and bust?

Continue reading "Q&A: Homeownership incentives, and what they mean for renters" »

January 4, 2010

Answers for your home buyer tax credit questions

Got unanswered questions about the home buyer tax credit?

The Consuming Interests blog is hosting a live chat at noon Tuesday -- Jan. 5 -- with Jackson Hewitt’s chief tax officer, Mark Steber. You can ask him your tax-credit (and other tax) questions then, or better yet, submit them in advance to eileen.ambrose@baltsun.com.

December 16, 2009

IRS makes it official

When we reported last week that the IRS had decided that spouses don't qualify for the $6,500 tax credit for repeat buyers unless both meet the length-of-ownership test, some of you thought we were pulling your leg. Especially because word hadn't filtered down to the folks answering the IRS's phones.

Gust wrote on Dec. 10, "Just called IRS. Was told that there had not been a ruling on this and a ruling should be made within a few weeks."

Nikole wrote three days later, "I spent a great deal of time on the IRS website to verify the info on this blog as well as the article in the Baltimore Sun. When I could not find the info I called the IRS, the gentleman I spoke to said that the IRS had not weighed in on this matter and should have a decision within a few weeks. He also said he did not know what source the Baltimore Sun had gotten their information from."

Er -- the IRS. But said agency has since answered various versions of the "do I qualify" question on its website, which should clear up any lingering doubt about whether personal finance columnist Eileen Ambrose and I were staging an elaborate prank.

Similar versions of those IRS answers were, if you recall, posted by Eileen on the Consuming interests blog last week. 

The IRS also addressed the question of what to do when one part of an unmarried couple qualifies for the $8,000 first-time buyer credit and the other qualifies for the $6,500 credit (which, though it's about repeat purchases, is technically part of the first-time home buyer credit):

Continue reading "IRS makes it official" »

December 11, 2009

The Baltimore-area housing market, Nov. '09 edition

My story today about November home sales in the Baltimore metro area includes what local real estate investor Alan Chantker calls the $64-billion-dollar question: What happens when the home buyer tax credit expires?

Assuming it's not extended again -- and the credit's chief promoter in the Senate swears this is it -- then it will stop being a factor in new contracts after April 30, the deadline to sign.

Then what?

Economist Dean Baker, who warned of the bubble years before it popped, says he expects the market will take another hit soon. He actually expects it before the credit expires, because he thinks the lure of the original $8,000 credit convinced people who would have bought next year to buy this year, thus decreasing next year's pool of potential buyers.

John Burns Real Estate Consulting, which advises the home building and real estate industries (some of you know the firm for its "housing cycle barometer"), is more optimistic. Steve Dutra, vice president of information there, expects modest sales improvement and flat to small decreases in prices next year in the area. (Still, Baltimore does top the barometer list of "areas of affordability concern," calculated by comparing metro areas to their historical norms.)

Kenneth Wenhold, Mid-Atlantic regional director of Metrostudy, another firm that advises home builders, has his own analysis of our area:

Continue reading "The Baltimore-area housing market, Nov. '09 edition" »

Posted by Jamie Smith Hopkins at 7:00 AM | | Comments (7)
Categories: First-time buyer tax credit, Housing stats
        

December 10, 2009

November home sales in the Baltimore metro area

Would you like to take a guess how much home sales rose last month -- compared with a year ago -- in the Baltimore metro area? Here, I'll give you choices:

A. 36 percent

B. 63 percent

C. 77 percent

It's "C." ("A" was October's increase.)

That's far and away the biggest increase on record, though of course the record only goes back to the late 1990s when Metropolitan Regional Information Systems started tracking the area. This sure suggests that lots of people were waiting until what they thought was the last minute to get that $8,000 credit for first-time home buyers. (The credit was supposed to expire after Nov. 30. Instead, it was extended and expanded.)

The 2,247 homes sold last month is well above November 2007 as well as November 2008, but it's below previous Novembers on record. (Well below the bubble years, as you can imagine.)

Most deals take longer than a month to close, so presumably a large portion of these deals were struck before November. But the number of contracts signed last month in the metro area was also up -- just not a 77 percent sort of up. The increase was 24 percent over the previous year.

Average sale prices fell about 8 percent in the region.

Want more stats? You'll find MRIS data here.

So what do you predict for December? Or, for that matter, after the credit expires next year, assuming it does?

Posted by Jamie Smith Hopkins at 10:21 AM | | Comments (4)
Categories: First-time buyer tax credit, Housing stats
        

December 2, 2009

A homebuyer tax credit Q&A

The Sun's lovely Consuming Interests blog held a Q&A on tax credits with IRS spokesman Jim Dupree, and -- as you might expect -- he was overwhelmed with questions about the $8,000 and $6,500 credits for home buyers.

If you missed the live chat, you can read the questions and his answers here. (He notes that he's still waiting for a decision on whether spouses are eligible for the $6,500 credit if one qualifies as a repeat buyer and the other doesn't.)

Here's one answer that might surprise you:

Nicole: My husband and I bought a house in June '09 together. Both of our names are on the deed. As of right now, we don't qualify for the home buyer tax credit due to joint income limitations. If we file married separate, his stand alone income qualifies for tax credit. Can we do this?

Jim Dupree: Yes you can, Nicole, but bear in mind that married persons filing separate returns only qualify for half of the maximum credit amount.

Posted by Jamie Smith Hopkins at 12:23 PM | | Comments (7)
Categories: First-time buyer tax credit, Repeat buyer tax credit
        

Home sellers, please don't do this

I stumbled across this Craigslist ad for a Pennsylvania home near the Maryland line, and I was amused/appalled to see how the asking price was presented:

In the headline: "$141900 / 3br - *After $8,000 FTB Rebate!"

In the first sentence of the listing: "$141,900 MAY BE YOUR NET COST AFTER FIRST TIME BUYERS TAX REBATE!!* *You must verify the amount of tax rebate you qualify for with your tax preparer."

The actual asking price -- $149,900 -- doesn't appear in the ad until the eleventh sentence.

Now, I understand a seller's inclination to point out that first-time buyers are eligible for eight grand back from Uncle Sam. But do we really want the housing market to sound like a "$69.99 after mail-in rebate!!" printer advertisement?

Posted by Jamie Smith Hopkins at 8:00 AM | | Comments (7)
Categories: First-time buyer tax credit
        

December 1, 2009

IRS takes your tax credit questions at noon

Reminder to all those with homebuyer tax credit questions: IRS spokesman Jim Dupree will take them -- and do his best to answer them -- during a live chat on the Consuming Interests blog today.

The chat begins at noon.

Dupree will also answer other tax-break questions, if you have any.

Posted by Jamie Smith Hopkins at 10:57 AM | | Comments (3)
Categories: First-time buyer tax credit, Repeat buyer tax credit
        

November 29, 2009

Real estate poll: Are you in the market?

Winter, as you've probably heard many times before, is not a big season for home buying and selling. But this winter, there's the federal tax credit of up to $8,000 for first-time buyers and up to $6,500 for repeat buyers to entice people into searching, icky weather or no.

There's some spring in there, to be sure -- you have until April 30 to sign a contract. But most of the time between now and then is decidedly winter.

I'm curious: Are you planning to buy or sell during the season? Or, for that matter, go apartment-hunting? Weigh in:

Homebuyer tax credit questions?

IRS spokesman Jim Dupree will answer tax credit questions -- including ones related to the $8,000 and $6,500 sweeteners for home buyers --  on the Sun's Consuming Interests blog at noon on Tuesday.

Got a question already? Comment on this Consuming Interests blog post or email it to eileen.ambrose@baltsun.com. Complex ones are more likely to get answered if Dupree has time to research.

 

November 12, 2009

Economist: Lower Baltimore's property tax rate now

Baltimore has the region's least expensive homes on average, so you might think it would see an outsized benefit from a tax credit aimed at getting first-time home buyers to the settlement table. Instead, the city's sales have increased the least. Only last month, in fact, did they stop falling compared with a year earlier.

Baltimore economist Anirban Basu is convinced the city's property tax rate is to blame.

The city's rate -- $2.268 for every $100 in assessed value -- is more than twice as high as the property tax rates in Maryland's counties. Baltimore County comes closest, at $1.10 per $100. The difference has for years frustrated residents, given city real estate agents indigestion and prompted talk that "something must be done." (The rate is six cents lower than it was in 2002, but most of the Baltimore suburbs lowered their rates, too.)

"We know that people who transact on the basis of an $8,000 tax credit care deeply about their tax exposure," said Basu, who has called for a steep drop in the city's rate. "It's unlikely that people who are looking to minimize their tax bill would choose the city first. It's not that nobody bought in the city, ... it's that not as many people bought in the city as had been anticipated by analysts."

He called on city leaders to lower the property tax rate now, despite the tight budget situation.

"The point is, you can't tax people who don't live here," Basu said. "What the tax is doing is keeping people who would want to live here from being here. ... There's now growing pent-up demand to move out of the city, and this demand is motivated by a desire for greater value."

Read on for a chart, a poll and Basu's thoughts on what drove buyers to the city in a big way during the bubbly years.

Continue reading "Economist: Lower Baltimore's property tax rate now" »

Posted by Jamie Smith Hopkins at 7:00 AM | | Comments (29)
Categories: First-time buyer tax credit, Polls, Property taxes
        

November 11, 2009

Home buyer tax credit update

The "do I qualify" questions keep pouring in about the revised $8,000 tax credit for first-time home buyers and the new $6,500 credit for certain repeat buyers. Here, for instance. And here. And also here. I'm hearing many variations of the same questions, so let me sum them up for you:

Q. When do the new provisions -- the higher income limits and the repeat-buyer credit -- go into effect? 

The IRS has weighed in on this one: for purchases made after Nov. 6. To get in before the credit program is due to expire, you'll need to sign a contract no later than April 30 and close on the deal no later than June 30.

Q. I qualify as a repeat buyer because I've owned my home at least five years, but I married more recently and my spouse would be considered a first-time buyer. Do we qualify for either credit if we buy a new place, or are we out of luck?

I couldn't tell from the legislation, so I called the IRS to find out. Spokesman Jim Dupree says the agency needs a bit more time to work through details like this one. "It's new legislation," he noted. "We should get some new guidance very soon -- any day now."

When it does, he said, it will update the agency website. The IRS answers questions about the older versions of the first-time buyer tax credit here, for instance. (One of its Q&As says a married couple can't get the first-timer credit unless both of them meet the requirements, even if they file separate tax returns.)

Q. I've been a homeowner for the last 10 years -- six years in my first home and four years in my current home. Do I qualify?

No. The legislation says individuals must have been in "the same residence" for "any 5-consecutive-year period during the 8-year period ending on the date of the purchase of a subsequent principal residence."

Q. I don't want to buy a new home, but I've owned my current home for at least five years. Am I eligible for the $6,500?

Er -- you do realize this is a "home buyer tax credit," right?

On a non-Q&A note, I thought you'd be interested in what Kevin A. Hassett of the American Enterprise Institute for Public Policy Research had to say about the tax credit program:

Continue reading "Home buyer tax credit update" »

November 10, 2009

More home buyer tax credits answered

Personal finance columnist Eileen Ambrose, part of the muscle behind The Baltimore Sun's Consuming Interests blog, answers a variety of questions today about the new repeat home buyer tax credit and the revised credit for first-time buyers.

You can read her column about the home buyer tax credits here, with readers' questions and answers from specialists such as Mark Steber, chief tax officer of Jackson Hewitt Tax Service. A taste:

I purchased a house in early 2005 that my wife and I are now selling. Can I obtain the new $6,500 credit? I'm close to the five-year mark but will be a couple of months off.

Steber says "The code is clear about the five-year timing. Unless you can put off the closing for another four months, you will not currently qualify for the credit."

Looking for more information? See some recent Wonk posts on the subject, including which potential repeat buyers qualify.

November 7, 2009

Who's eligible for the repeat-buyer tax credit?

Many people are homeowners, so it's not surprising that many people have been asking if they'd be eligible for the new, $6,500 tax credit intended for repeat buyers. One sticking point has been the legislative language used to explain eligibility:
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 period ending on the date of the purchase of a subsequent principal residence, such individual shall be [eligible for the credit] with respect to the purchase of such subsequent residence.

Does that mean people who lived in their homes for the past five years and want to move on? People who lived in their homes for at least five years after late 2001, have since been renting it out and now want a new primary residence? People who lived in their homes for at least five years after late 2001, sold the place and now want to buy again?

I posed this to a Senate Finance Committee aide, and he said yes. Yes to all three.

I wondered that to begin with, but the "ending on the date of the purchase of a subsequent principal residence" part made me second-guess myself.

I urge you all not to spend that $6,500 before it's a sure thing that you can get it -- let's see what the IRS has to say, eh? But Wonk reader SSK, it does look like you can take advantage of the credit. (SSK posed this question: "I lived in my Baltimore house for 12 years. Just sold it in July. I re-located to Ohio and am renting. I'm about to bid on a new home. So, I lived in my home for more than 5 years, but I'm temporarily renting now. Do I qualify?")

Continue reading "Who's eligible for the repeat-buyer tax credit?" »

November 6, 2009

Expanded home buyer tax credits to become law

It took a while for the Senate to hammer out an agreement on the home buyer tax credit, but only a day for the House to pass an identical measure. President Barack Obama is expected to sign it into law today.

The National Association of Realtors says the new provisions -- a longer time frame for the $8,000 first-time buyer credit, higher income limits and a $6,500 credit for certain repeat buyers -- will go into effect as soon as pen hits paper. The trade group has a handy "compare the tax credits" chart that you can find here.

You can also read more about the details on yesterday's tax-credit blog post.

The first-time buyer tax credit, hailed by the real estate industry as a stabilizing force for the battered housing market, has its critics. They say it's a lot of money, much of it going to people who probably would have bought anyway and some of it going to tax cheats (including 19,000 who didn't actually purchase a home). Some of you have said you think it's a stimulus that won't help in the long run.

In this running Wonk poll, I asked you a simple question about the bill: Thumbs up, down or sideways? The voting was overwhelmingly thumbs up at first. But as of last night, the results were split: 49 percent down, 47 percent up and 4 percent sideways. 

I chatted yesterday with Heather Fernandez, vice president of marketing with real estate search engine Trulia. She's enthusiastic about the soon-to-be-law, though not without reservations. One reason to cheer, she said, is that consumers pump money into the economy after buying a home ($30,000 within the first six months on items ranging from furniture to hot water heaters, Trulia found in a study last year). She also thinks the credits will help move more foreclosures and cushion prices in the short term.

There's a significant "but," though: "What happens to real estate demand on May 1?" Fernandez asks. April 30 is the last day you can sign a contract and still qualify for the first-time or repeat-buyer tax credits.

"While this may spur tremendous activity in the short term, what's going to stop demand from dropping off a cliff?" she said.

Continue reading "Expanded home buyer tax credits to become law" »

November 5, 2009

Senate passes home buyer credits

Here's something Republican and Democratic Senators agree on: tax credits for home buyers.

With a 98 to 0 vote Wednesday, the Senate passed legislation to extend the credit for first-time buyers and add a credit for certain repeat buyers. It's expected to move to the House floor today.

It seems to be the same proposal we've been talking about for the last few days. Highlights:

--$8,000 for first-timers signing contracts through April 30 and closing by June 30. That credit was due to expire at the end of the month.

--$6,500 for repeat buyers who have "lived in their current residence for five consecutive years out of the last eight," the Los Angeles Times reports. But Sen. Harry Reid's press release phrases it as "those who have owned a home for five consecutive years within the previous eight years." More on this in a moment.

--Individual tax filers making no more than $125,000 and joint filers making no more than $225,000 could take the full credit, a significant increase of the income cap. The credit would decrease in value for people making more than those amounts, phasing out completely after $145,000 for singles and $245,000 for couples, the Times says.

--If the home you're buying is priced over $800,000, you can't partake.

You might be wondering what this "five consecutive years out of the last eight" really means for potential repeat buyers. I did, because it makes a difference whether it's "lived in their current residence for five consecutive years out of the last eight," as the Times writes, or "those who have owned a home for five consecutive years within the previous eight years," as Reid puts it -- or something else entirely.

Continue reading "Senate passes home buyer credits" »

October 31, 2009

Home buyer tax credits: Are you in?

I asked you to give the Senate's proposed tax credits for first-time and repeat home buyers a thumbs up, down or sideways, and oh boy, you responded. As of 10 p.m. last night, nearly 500 people had weighed in on the Wonk poll.

Almost 80 percent of voters offered a thumbs up. Five percent don't love it or hate it and gave it a sideways thumb. The rest say no thanks.

Some commenters wondered what personal situations were influencing these choices. Sounds like a poll:

Need a refresher? The tentative Senate deal would extend the $8,000 first-time home buyer tax credit -- you could sign a contract through April 30 as long as you closed by June 30. It would also create a new tax credit of up to $6,500 -- starting Dec. 1 -- for repeat buyers who have been in their current homes for at least five years and are getting a new primary residence.

For more details (income limits, price limits, etc.), read this home buyer tax credit post.

Posted by Jamie Smith Hopkins at 7:00 AM | | Comments (7)
Categories: First-time buyer tax credit
        

October 30, 2009

Home buyer tax credit: More details and a lot of angst

More details about the tentative Senate agreement to extend and expand the first-time home buyer tax credit:

--As you probably already heard, the credit would be available to buyers signing contracts through April 30 and closing by June 30. First-timers would continue to be eligible for up to $8,000. Other buyers could get up to $6,500, starting Dec. 1, if they've lived in their current home for at least five years.

--Income limits would be increased to $125,000 for individuals and $225,000 for couples, with the credits phasing out above those amounts.

--Repeat buyers must be getting a primary residence, not a vacation or investment property. But you're allowed to keep your current home.

--Eyeing a home priced above $800,000? You can't get this credit, the senators say.

--Read their lips: No more credits for 4-year-olds. First-time buyer tax credit fraud, including money funneled to preschoolers and to people who didn't actually buy anything, prompted senators to require that buyers be at least 18 and submit copies of their HUD-1 settlement statements when applying for the credit.

News of this extension and expansion touched off a firestorm of discussion here, and emotions of all sorts. Hope among some homeowners who could use $6,500. Frustration among those who would miss out under the proposed restrictions. Aggravation among renters who think credits are artificially propping up the market at taxpayers' expense.

Continue reading "Home buyer tax credit: More details and a lot of angst" »

Posted by Jamie Smith Hopkins at 7:00 AM | | Comments (60)
Categories: First-time buyer tax credit
        

October 29, 2009

First-time AND second-time home buyer credit?

Senators have cut a deal to extend and expand the popular first-time home buyer tax credit, though -- as The Wall Street Journal notes -- don't count on it just yet.

The tentative agreement worked out by Senate negotiators would allow buyers to sign contracts through April 30 as long as they close by June 30. First-timers would continue to be eligible for up to $8,000, while some repeat buyers could get up to $6,500.

Which repeat buyers? "The reduced credit would be available to all home buyers who have been in their current residence for a consecutive five-year period in the past eight years," the WSJ reports.

This hasn't yet passed the Senate, which is trying to decide which other economic measures to tack on to a bill, and it faces skepticism in the House. (As you'll recall, a number of people have allegedly claimed the credit despite not qualifying as first-time buyers, not being old enough to buy a house, not actually buying a house, etc.)

What do you think? Weigh in:

Posted by Jamie Smith Hopkins at 9:32 AM | | Comments (34)
Categories: First-time buyer tax credit, Polls
        

October 24, 2009

First-time home buyer tax credit: news roundup

Three things about the first-time home buyer tax credit:

1. Despite the credit's name, you don't actually have to be a first-time buyer to get it, merely someone who hasn't owned a home in three years. But you are supposed to -- you know -- actually buy a home.

The Treasury Inspector General for Tax Administration says more than 19,000 people have claimed the credit despite not purchasing anything. Just over 70,000 claimed it though they apparently didn't meet the definition of a first-time buyer. And 582 individuals under 18 claimed it, including some 4-year-olds. (I can just picture the parents: "What? He's a first-time buyer, isn't he?")

The agency says it "recommended that the IRS require taxpayers to provide documentation to verify a home purchase, such as a U.S. Department of Housing and Urban Development Settlement Statement (HUD-1) issued to homebuyers at closing," but the IRS said "nah." (OK, not exactly "nah," but that's the general idea.)

2. The Government Accountability Office issued a report that -- among other things -- breaks out the tax-credit usage by state as of Aug. 22. Maryland ranks 34th, with about 24,000 taxpayers claiming $166 million in credits. Report here, in PDF form. (Thanks to Jay Hancock for noticing this.)

Total nationwide: 1.4 million taxpayers claiming nearly $10 billion. Both the current version of the credit and the less-generous 2008 credit are included in the tally.

3. If you haven't already signed a contract on a home, you're going to be hard-pressed to get the credit -- assuming it expires Nov. 30 as planned. To close by that date, "you basically would have to sign a contract to buy a house today to qualify," Lawrence Yun, chief economist for the National Association of Realtors, told the Los Angeles Times ... yesterday.

Several local real estate agents, noting that most first-time buyers use slower-to-close FHA-insured loans, have told me they recommend allowing 45 to 60 days.

UPDATE: Looking for news about the Senate proposal on first-time and repeat-buyer tax credits? Go here.

Posted by Jamie Smith Hopkins at 7:00 AM | | Comments (41)
Categories: First-time buyer tax credit
        

October 5, 2009

The first-time buyer tax credit and you

The $8,000 tax credit for first-time buyers (or more precisely, people who haven't owned a home in three years and meet the income limitations -- try saying THAT five times fast) is due to expire the end of next month. I'm curious how many of you are doing some serious house-hunting to try to beat the deadline, and how many of you have been affected one way or another by the credit so far.

The numbers suggest an impact. Buyers in the Baltimore metro area signed 19 percent fewer contracts in February than a year earlier. The drop in March -- the first full month after the program was altered so the money doesn't have to be paid back -- was a much more modest 4 percent. Signed contracts began rising in April.

In August, the most recent numbers from Metropolitan Regional Information Systems, the number of new contracts was up 25 percent from a year earlier.

So it certainly looks like there's buying going on that wouldn't have happened this year if not for the thought of $8,000 in the bank. But who knows -- it could be a huge coincidence. Help sort it out by noting how (if at all) the credit has affected you:

But wait -- there's more!

Continue reading "The first-time buyer tax credit and you" »

Posted by Jamie Smith Hopkins at 7:00 AM | | Comments (7)
Categories: First-time buyer tax credit, Polls
        

September 8, 2009

Got questions about the first-time buyer tax credit?

The IRS will be answering them on the Baltimore Sun's Consuming Interests blog today at noon.

If you'd like to submit a question early, email it to eileen.ambrose@baltsun.com.

Posted by Jamie Smith Hopkins at 9:43 AM | | Comments (0)
Categories: First-time buyer tax credit
        

September 6, 2009

$8,000 buyer credit: No, your 3-year-old does not qualify

Consumer finance columnist Eileen Ambrose, in a piece today about the impending deadline for the first-time buyer tax credit, notes that some folks are really trying to push the envelope to get the $8,000.

For instance, she writes, here are a few examples of questions submitted to The Baltimore Sun's Consuming Interests blog:
One homeowner considered filing taxes separately from her husband or even divorcing him if that would help him get the credit.

Parents ask if a child can claim the credit if they refinance their mortgage and put the child's name on the new loan. And one parent acknowledges that she and her husband don't qualify for the credit but asked if they could get the money by buying a house under their 3-year-old's name.

Nice try, but no dice, the Internal Revenue Service says.

Posted by Jamie Smith Hopkins at 4:44 PM | | Comments (0)
Categories: First-time buyer tax credit
        

August 19, 2009

The clock is ticking on the $8,000 tax credit

Determined to get the $8,000 tax credit for first-time buyers? Keep in mind that the Nov. 30 deadline isn't about signing a contract -- you need to get to closing no later than that day.

So says the IRS, which specifically uses the word "close." This matters because you'll want to allow at least 30 days -- and probably more like 60 -- for a normal transaction to go from contract to closing. Even if there's nothing unusual about the home you're buying, you could find yourself delayed by issues relating to the loan, the appraisal, the home inspection -- you name it.

That goes double if you want something more complicated, such as a foreclosure.

Continue reading "The clock is ticking on the $8,000 tax credit" »

Posted by Jamie Smith Hopkins at 7:00 AM | | Comments (7)
Categories: First-time buyer tax credit
        

June 9, 2009

More on the $8,000 new-buyer tax credit

Eileen Ambrose, the Sun's personal finance columnist, offers some details about putting the $8,000 first-time homebuyer tax credit toward down-payment or closing costs. Who qualifies, how big the mortgage can be, where you can call for more information, etc. Her column is here.

And remember, this doesn't reduce the minimum down-payment requirement:

The advance can't be used for the 3.5 percent down payment required under FHA-insured loans. But it can be applied to other purchase costs or to make a bigger down payment, thereby reducing your monthly mortgage payments.

Anyone out there planning to use the credit this way?

Posted by Jamie Smith Hopkins at 10:27 AM | | Comments (6)
Categories: First-time buyer tax credit
        

May 30, 2009

Using the new-buyer tax credit for downpayment

It's official: Uncle Sam wants to be the sort of relative that gives you money for your downpayment. The U.S. Department of Housing and Urban Development announced Friday that new buyers getting an FHA-insured mortgage can use the first-time buyer tax credit, worth up to $8,000, toward the downpayment and other purchase costs.

But not exactly the way you might have envisioned it.

FHA borrowers are required to put at least 3.5 percent down. Well, that won't change. Instead, the "monetized" tax credit -- money upfront rather than a break on your taxes later -- can be added to that downpayment so your monthly costs are lower. Or you can use it on other closing costs or to buy down your interest rate.

As The Wall Street Journal puts it, "the industry could be disappointed by the plan ... because they wanted to allow buyers to use the credit to fund the initial 3.5% down-payment." But it probably comes as a pleasant surprise to the critics who feared the plan would create a new wave of no-money-down buyers.

If you do go for this option, remember that you're getting a short-term loan for your tax credit and you'll probably pay upfront for the convenience. HUD warns buyers to "beware of mortgage scams and carefully compare benefits and costs when seeking out tax credit monetization services."

Here's what the agency says in its letter to lenders:

FHA-approved mortgagees and FHA-approved nonprofit organizations as well as Federal, state, and local governmental agencies and instrumentalities thereof may purchase the tax credit anticipated by the homebuyer.  

Conditions:
•    The proceeds of the sale of the tax credit may not exceed the anticipated tax credit due the homebuyer ...
•    Any costs attendant to the purchase of the tax credit ... must be reasonable and disclosed to the homebuyer.  In FHA’s view, fees and costs that total more than 2.5% of the anticipated credit are considered excessive.  (Example:  $6000 to be refunded, with all fees and costs discounted, borrower should receive not less than $5850.00 for sale of tax credit.)

So, folks: What do you think?

Posted by Jamie Smith Hopkins at 1:03 PM | | Comments (4)
Categories: First-time buyer tax credit
        

May 17, 2009

Housing stimulus?

Realtors and homebuilders are all abuzz over the federal government's newest plan to help the housing market: let first-time homebuyers use the $8,000 tax credit toward their downpayment if they're getting an FHA-insured mortgage.

The head of the U.S. Department of Housing and Urban Development announced it at a National Association of Realtors summit last week. Here's what Secretary Shaun Donovan said:

We, like you, believe that this new tax credit is not only a tremendous opportunity for first-time homebuyers, but also an enormous benefit for communities struggling to deal with an oversupply of housing. ...
We all want to enable FHA consumers to access the tax credit funds when they close on their home loans so that the cash can be used as a downpayment. So FHA will permit trusted FHA-approved lenders and HUD-approved nonprofits, as well as state and local governmental entities to "monetize" the tax credit through short-term bridge loans.

Specifics, he said, will come shortly. (I was hoping "shortly" meant "by the end of the week," which is why I held off blogging on the subject.) But the brief announcement was plenty long enough for Realtors and builders to cheer -- "the biggest obstacle for first-time buyers is coming up with a downpayment," the chairman of the National Association of Home Builders said -- and for some economists to groan.

From Dow Jones Newswires:

"Much like the lax lending standards of the housing bubble, all it succeeds in doing in our view is pulling sales forward and encouraging speculative buyers into the market," noted Michael Widner, an analyst with Stifel Nicolaus Equity Research.

What do you all think? Good idea or bad? If you're contemplating buying, would it make a difference?

In other feds-involved-in-housing news, officials announced new aspects of the Making Home Affordable foreclosure-prevention program. HUD says it will offer incentives to loan services and borrowers to opt for short sales or "deeds in lieu" (in which the borrower voluntarily gives up the house) rather than foreclosures. Those alternatives aren't quite as bad for the borrower's credit score and, the government argues, are less costly for lenders and neighborhoods.

The feds are also offering extra incentive payments to lenders for making loan modifications "where home price declines have been most severe and lenders fear these declines may persist."

Posted by Jamie Smith Hopkins at 9:16 AM | | Comments (7)
Categories: First-time buyer tax credit, Foreclosure help
        

April 7, 2009

Cardin: 'Now is the time to buy'

There's a lot of debate about whether to buy a home now or wait to see if prices fall farther. U.S. Sen. Benjamin L. Cardin has come out on the side of now, reminding renters Monday of the $8,000 tax credit for purchases made through November and "to advocate for buyers' counseling and to boost the slumping housing market," Mary Gail Hare reports in a story today:
"Now is the time to buy," Cardin said, while standing in the garage of the home whose buyers took advantage of the credit.

I'm interested in hearing from people who are planning to buy soon, and those who want a house but intend to wait. If you're about to buy, what made you decide to take the plunge? If you're not, what market signal (or life change) are you waiting for before you make your move?

Posted by Jamie Smith Hopkins at 9:41 AM | | Comments (3)
Categories: First-time buyer tax credit
        
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About Jamie Smith Hopkins
Jamie Smith Hopkins, a Baltimore Sun reporter since 1999, writes about the regional economy. Her reporting on the housing market has won national and local awards. Hopkins is a Columbia native and has lived in Maryland all her life, save for 10 months spent covering schools in Ames, Iowa.
She trained to become a wonk by spending large chunks of time as a geek and an insufferable know-it-all.
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