The Petalumahomes.com Realty Weblog

On June 30, the Senate passed HR 5623, extending the closing deadline for the homebuyer tax credit eligibility from June 30 to Sept. 30, 2010.The extension applies only to transactions that were under contract as of April 30, 2010 and have not yet closed.

(Courtesy of CAR.org)

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I’m happy to report that Governor Schwarzenegger signed Assembly Bill 183, the Homebuyer Tax Credit legislation, into law. His actions today are the result of efforts in Sacramento over the last several weeks as members in the capital worked for the bill’s passage before it landed on the governor’s desk.

AB 183 will provide $200 million for home buyer tax credits, allocating $100 million for qualified first-time home buyers of existing homes and $100 million for purchasers of new, or previously unoccupied, homes.

The eligible taxpayer who purchases a qualified personal residence on and after May 1, 2010, and on or before Dec. 31, 2010, or who purchases a qualified principal residence on and after Dec. 31, 2010, and before Aug. 1, 2011, pursuant to an enforceable contract executed on or before Dec. 31, 2010, will be able to take the allowed tax credit. The credit is equal to the lesser of 5 percent of the purchase price or $10,000, in equal installments over three consecutive years. Under AB 183, purchasers will be required to live in the home for at least two years or forfeit the credit (i.e., repay it to the state).

The positive impact of the federal home buyer tax credit is clear. Nearly 40% of first-time home buyers said they would not have purchased a home if the federal tax credit for first-time home buyers was not offered, according to research conducted by California Association of Realtors last year.

The state’s previous home buyer tax credit program was so successful that it ran out of tax credits by the end of June 2009, eight months before it was set to expire and just as housing markets appeared to be turning a corner. Unlike last year’s legislation, AB 183 adds a tax credit for the purchase of an existing home by a first-time home buyer.

AB 183 will significantly contribute to the effort to stimulate jobs-creation within California’s housing market by helping to incentivize first-time home buyers to purchase homes that have been abandoned, foreclosed upon and returned to the lender, or have been sitting on the market for extended periods of time. It is these homes that will require substantial rehabilitation by the new owners, which will in turn generate a tremendous increase in jobs and accessory purchases connected to home improvement activities.

If you’re not already involved in the political process, I encourage you to do so. You can go to http://www.car.org/governmentaffairs/getinvolved/ for a quick guide to involvement opportunities at the local, state, and national levels.

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St. Patrick’s Day, which marks the anniversary of St. Patrick’s death in the fifth century, falls on Wednesday, March 17. How much do you know about St. Patrick’s Day? Here’s some fun trivia information, courtesy of History.com, to help you get to know the Irish holiday a little better.

Chicago is famous for dyeing the Chicago River green for St. Patrick’s Day. The tradition started in 1962,  when city pollution-control workers used dyes to trace illegal sewage discharges and realized that the green dye might provide a unique way to celebrate the holiday. That same year, they released 100 pounds of green vegetable dye into the river—enough to keep it green for a week! Today, only 40 pounds of dye are used, making the river green for several hours.

“Erin Go Bragh,” a phrase often heard on St. Patrick’s Day, means “Ireland, My Home.”

Corned beef and cabbage is a traditional St. Patrick’s Day dish. Typically, more than 40 billion pounds of U.S. beef and more than 2 billion pounds of cabbage are sold every year.

Irish Soda Bread gets its name and distinctive character from the use of baking soda instead of yeast as the leavening agent.

There are more than 100 St. Patrick’s Day parades that take place around the United States with the New  York and Boston parades being the largest.

There are four places in the United States named Shamrock: Mount Gay-Shamrock, West Virginia;  Shamrock, Texas; Shamrock Lakes, Indiana; Shamrock, Oklahoma.

There are nine places in the United States that share the name of Ireland’s capital, Dublin. Dublin,  California has surpassed Dublin, Ohio as the most populous of these places.

There are 36.5 million residents in the United States who claim Irish ancestry. The number is almost nine  times the population of Ireland itself!

There are three states in which Irish is the leading ancestry group: Delaware, Massachusetts and New  Hampshire.   Irish is among the top five ancestries in every state but two, Hawaii and New Mexico.

The first St. Patrick’s Day parade took place in the United States—not Ireland. Irish soldiers serving in the English military marched through New York City on March 17, 1762. Along with their music, the parade helped the soldiers to reconnect with their Irish roots, as well as fellow Irishmen serving in the English army.

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With only a little less than two months until the new $8,000 first-time homebuyer and the $6,500 existing home buyer federal tax credits are set to expire, time is running out on an opportunity that buyers and sellers may not see again. The tax credit, which was originally created in mid 2008, then expanded in January 2009 and extended again this past November, was only designed to be a short-term incentive to drive more buyers into the housing market. That’s why many people in Congress are saying that, come April 30, 2010 when the credit expires, “That is it!”So the clock is ticking. The average real estate transaction, from offer to closing, takes approximately 90 days and that is just about where we are now. To meet the federal deadlines, a buyer must have a binding sales contract in place by April 30, and have the home purchase completed by June 30. To achieve those time frames, buyers need to act almost immediately. Those deadlines also mean that this is also a prime opportunity for sellers. As the April 30 deadline gets ever closer, we are bound to see an influx of home-seekers who are hoping to find a house and make an offer in time to receive the tax credit. So for sellers who have been considering moving up in the market, downsizing, or relocating, now is an opportune time to put their house on the market.

We’re at a unique time in real estate. The tax credit deadline is helping to create the “perfect storm” in the market, due to four key elements – “I.I.I.P”:

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If you were listening to the housing news last week, you probably heard a number of reports about lending changes that were announced by the Federal Housing Administration (FHA). While many of the news reports were confusing, the truth is pretty clear, and isn’t as bad as some people may have heard.

Overall the measures are intended to help the FHA better manage its risks and strengthen its capital reserves, while still providing home loans to the nation. The good news, as FHA Commissioner David Stevens stated recently, is that “by continuing to provide affordable, responsible mortgage products, FHA will support the housing market’s recovery” and “remain the largest source of home purchase financing for underserved communities.”

What’s Changing?

If you or someone you know is considering an FHA loan, some of these changes may affect you. Here’s a clear, concise rundown of the major changes and what they mean:

1. Increased mortgage insurance. The mortgage insurance premium (referred to as private mortgage insurance by many people) will be increased from 1.75% to 2.25%. This change will add some cost to purchasing a home, but will not overburden consumers since the mortgage insurance is paid over the life of the loan, rather than upfront at closing.

2. New down payment and credit score requirements. According to the new policy, homebuyers who have a credit score of at least 580 may still be able to purchase a home with 3.5% down, but those with credit scores of less than 580 will be required to put down at least 10%. This change is designed to help the FHA balance its risk, while still providing affordable down payments for consumers with a history of good credit and responsibility.

3. Reduced seller concession. Basically, this change means that the person selling the home will now only be able to offer the homebuyer 3% to help defray closing costs, as opposed to 6% under the previous policy.

In addition to these changes, the new policies contain a series of new measures aimed at increasing lender enforcement.

These changes will become effective on April 5, 2010. The bottom line is that the changes will impact some homebuyers more than others. But in the end, the FHA is still committed to providing affordable home loans.

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First-Time Homebuyers (FTHBs): First-time homebuyers (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000.

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

Current Owners: The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

What are the New Deadlines?

In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

Tax Credit Versus Tax Deduction

It’s important to remember that the tax credit is just that… a tax credit. The benefit of a tax credit is that it’s a dollar-for-dollar tax reduction, rather than a reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a first-time homebuyer were to owe $8,000 in income taxes and would qualify for a tax credit of $8,000, she would owe nothing.

Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little income tax liability. For example, if a first-time homebuyer is eligible for a tax credit of $8,000 but is liable for $4,000 in income tax, she can still receive a check for the remaining $4,000!

Higher Income Caps

The amount of income someone can earn and qualify for the full amount of the credit has been increased.

Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible

Joint filers who earn up to  $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

Maximum Purchase Price

Qualifying buyers may purchase a property with a maximum sale price of $800,000.

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Remember, the new tax credit program includes a number of details and qualifications. For more information or answers to specific questions, please call or email me today.

In addition, you may be able to benefit from additional housing related provisions, including the following:

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Tax Incentives to Spur Energy Savings and Green Jobs

This provision is designed to help promote energy-efficient investments in homes by extending and expanding tax credits through 2010 for purchases such as new furnaces, energy-efficient windows and doors, or insulation.

Landmark Energy Savings

This provision provides $5 Billion for energy efficient improvements for more than one million modest-income homes through weatherization. According to some estimates, this can help modest-income families save an average of $350 a year on heating and air conditioning bills.

Repairing Public Housing and Making Key Energy Efficiency Retrofits To HUD-Assisted Housing

This provision provides a total of $6.3 Billion for increasing energy efficiency in federally supported housing programs. Specifically, it establishes a new program to upgrade HUD-sponsored low-income housing (for elderly, disabled, and Section to increase energy efficiency, including new insulation, windows, and frames.

Expanding Housing Assistance

This provision increases support for several critical housing programs. It includes $2 Billion for the Neighborhood Stabilization Program to help communities purchase and rehabilitate foreclosed, vacant properties.

As always, if you have any questions about your specific situation or would like to discuss how you may benefit from this program, please call or email me. I’ll be happy to sit down with you.

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As outlined in Brent’s discussion below, the $8,000 federal tax credit for first-time home buyers is set to expire November 30, 2009. Since its inception earlier this year, the tax credit has brought 1.4 million new buyers into the market nationwide, according to NAR.  In California, nearly 40 percent of first-time home buyers reported they would not have purchased a home without the tax credit, according to a C.A.R. survey.

We feel it is our job to keep you abreast of any and all changes happening in the financial and housing markets. The extension and expansion of the homebuyer tax credit is something that we feel deserves your attention. We support an extension and expansion of the federal tax credit through 2010 and to include all home buyers—not just first-timers.  Historically, housing has led the nation out of economic downturns, and can do so again.

Most importantly we are asking you to get involved. If you could benefit from the homebuyer tax credit, have already done so, or know someone who has, then please take action by getting in touch with your Congressperson. Click here to visit the official website to take action! Copy and past this link into your web browser if you’re having trouble opening the link above: http://takeaction.realtoractioncenter.com/campaign/hbtc/w6nexgg42j3tbket?.

One of the key issues on the table is the proposed expansion of the tax credit submitted by Sen. Johnny Isakson, R-Georgia, as an amendment to the original bill earlier this year to be a part of the economic stimulus package for 2009.  The proposal will change the original terms in a couple of very important ways: increase the amount to $15,000 (or 10% of the home’s price tag, whichever is less) and be available to anyone (not just first-time homebuyers) buying a primary residence during a one-year period beginning on the date of enactment.

Below is a recent update published by the Wall Street Journal about the out pouring of support and push for this new legislation:

UPDATE: Industry Makes Case For Home Buyer Tax-Credit Extension

A slate of representatives from sectors that thrive on the construction, sale and upkeep of homes made a strong pitch for extending the $8,000 first-time home buyer tax credit in a U.S. House hearing Wednesday.

The home builder, realtor, construction, title insurance and architecture industries argued that the credit has helped to stabilize the housing market and also boost the broader economy. Some of the groups are pushing to increase the size of the credit and expand it beyond first-timers.

“The economic stimulus created by established households moving into new homes and the added construction necessary to answer demand where there is no excess supply generates jobs, wages, salaries, business income and tax revenues,” Joe Robson, an Oklahoma home builder, said in prepared remarks to the House Small Business Committee.

Passed into law earlier this year as part of economic stimulus legislation, the credit is set to expire on Nov. 30.

Extending the credit enjoys scattered support from members of both parties in Congress. However, it could meet resistance from lawmakers looking to repair their fiscal bona fides after the costly bailouts of the financial and automobile sectors and legislation to prop up the economy.

The price tag for merely extending the credit will be high: It will cost nearly $1 billion per month, according to an estimate from Congress’ Joint Tax Committee. A Senate proposal to boost its size to $15,000 would cost much more.

House Democrats are also likely to demand measures to offset the cost of any extension, forcing proponents to compete for the limited “pay-fors” available to cover the cost of spending measures.

Industry groups contend that not extending the tax credit could jeopardize the fragile housing recovery, creating more costs for the government down the road. They point to an oversupply of homes on the market and the threat of another wave of foreclosures to argue that the credit is still needed to prop up demand.

“The threats of more foreclosed property coming to the market, combined with the mortgage rate resets and growing unemployment are simply too great to take a wait and see approach,” Joseph Canfora, a real-estate broker from East Islip, N.Y., said in prepared remarks on behalf of the National Association of Realtors.

The National Association of Home Builders is pushing to extend the credit through Dec. 1, 2010, and open it to all people buying a primary residence. It estimates that this would boost home sales by nearly 400,000 next year, creating nearly 350,000 jobs.

Pamela Volm, the president of a Maryland construction company, argued the credit is helping to keep construction workers employed.

“New buyers purchasing homes would mean millions upon millions of dollars injected into local businesses and the communities in which they are located,” Volm said in prepared remarks.

The Mortgage Bankers Association supports expanding eligibility for the tax credit and also wants to increase its size to $15,000. The trade group, in a statement submitted to the panel, argued its proposal will help to combat a glut of homes in certain parts of the country.

“In simple terms, demand is not keeping up with the current supply. MBA supports tax initiatives that would encourage home purchase activity,” the group said in the statement.
- Jessica Holzer, Dow Jones Newswires. Published October 7, 2009. Click here to see the original article. 

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