$8,000 tax credit is the stimulus for the housing market

Analysis: Tax Credit Adds 357,000 Buyers

A study estimates that 357,000 buyers have been motivated so far by the $8,000 First-Time Homebuyer Tax Credit.The study by Campbell Surveys, a division of Campbell Communications, calculated the figure by comparing the number of first-time homebuyers before and after the tax credit was instituted. The percentage of first-time buyers rose from 32 percent in January and February to 43 percent for the rest of the year – except July when the rate fell to 42 percent. Campbell’s Research Director Thomas Popik pointed out that this survey mirrors the numbers calculated by the National Association of REALTORS® and those from Moody’s Economy.com.The data supports legislative efforts in both the U.S. House and Senate to extend the tax credit.

Source: HousingWire.com, Austin Kilgore (09/22/2009)

Good News for Interest Rates

Fed Unlikely to Raise Rates The Federal Reserve is likely to keep interest rates near zero when it ends its two-day meeting on Wednesday, say economic researchers. It is also predicted that the Fed will not slowdown its lending and bailout programs.Peter Morici, professor of economics at the University of Maryland, says, "The Fed normally anticipates the recovery by raising rates, taking away the punch bowl just as the party gets interesting. But this is not a normal recovery. It's tepid and weak.

"Source: CNNMoney.com, David Goldman (09/21/2009)

Extending the Housing Tax Credit

Daily Real Estate News September 16, 2009

Economists: Extend the Housing Tax Credit More than 40 percent of all home buyers in 2009 will qualify for the federal tax credit, costing the government about $15 billion, twice the original estimate, but most housing experts applaud the policy and favor expanding it.Now the decision is up to Congress.Mark Zandi, chief economist for Moody’s Economy.com, believes that the credit should be expanded to all homebuyers, even investors, through summer of 2010. “The risks of not doing something like this are too great,” he said. “I don’t think the coast is clear.”James Glassman of JPMorgan Chase also favors expanding the credit but continuing to limit it to first-time buyers.Industry members who are lobbying for the extension are optimistic and say they believe an extension will be approved in some form. “There will be a lot of water under the bridge, a lot of compromise, between now” and a final bill, said Richard A. Smith, chairman of the Business Roundtable’s Housing Working Group.

Source: The New York Times, David Streitfeld (09/15/2009)

7 Tips for First Time Home Buyers

Daily Real Estate News September 14, 2009

7 Tips for First-Time Home Buyers

A year after the financial collapse of 2008, the housing market is very different than it was before the foreclosure crisis.Here are seven bits of wisdom from economists and financial planners for anyone contemplating a home purchase today:

• Old-fashioned basics are more important than ever. The safest way to purchase a home is to put down 20 percent on a fixed-rate, 30-year (or less) mortgage.
• Don’t become overconfident about income growth. Even though buyers in their 20s and 30s will likely see their incomes grow more quickly than previous generations, it is important to act sensibly when borrowing.
• Anyone contemplating adding children to the family should calculate whether they could live on one income because having both halves of a couple work may turn out to be impractical.
• Include a maintenance budget. Even new homes need upkeep and repairs.
• Buyers who can't afford their dream home now should opt for a starter home where they can save money each month for what they really want.
• Consider a property that can be expanded and improved down the road when money is available.
• No two buyers are the same, but they should all feel confident with the loan they enter into, no matter the size of the mortgage.

Source: The New York Times, Ron Lieber (09/12/2009)

Is turning that languishing property into a rental the right move?

More Sellers Turn to Rentals More people are becoming landlords in an economy where selling a home can be challenging.The nation’s second-largest home insurer, Allstate Corp., says the number of homeowners converting their homeowners insurance to landlord policies rose 27 percent in the first quarter of 2009.Jim Bass of Jim Bass Real Estate Group in Frederick, Md., says he has begun offering property-management services for absent owners, many of whom are convinced it will be easier to sell in a couple of years.Holding on probably isn’t the best answer, says economist Edward Leamer, director of the UCLA Anderson Forecast. Leamer suggests negotiating a short sale instead. “Better to take your losses and move on.”Another factor to consider is whether renting will reduce or eliminate the value of the capital-gains tax exclusion. Federal tax law requires living in the home at least two of the previous five years to qualify for the full capital-gains tax exclusion when the house is sold. Of course, if there is no profit to be had, then this isn’t a problem.

Source: The Wall Street Journal, M.P. McQueen (09/02/2009)

Tips for Seller Financing

5 Steps to Financing a Sale

Selling a home and helping the buyer finance may be a good option to getting a house sold, experts say. Yet it is imperative that the seller thoroughly investigate the buyer’s finances before agreeing to the deal.

Here are some important initial steps to take:

Investigate the buyer by asking him to fill out a Uniform Residential Loan Application.

Get bankruptcy details by checking out the case through Public Assess to Court Electronic Records (PACER), a service of the U.S. Judiciary.

Pull the buyer’s credit report and eviction and criminal history via http://www.american-apartment-owners-association.org/tenant-screening/.

Insist on 20 percent down or offer a contract for deed, which only confers full ownership rights after the home is paid off.

Consider offering a lease-option with part of the payment going toward the purchase price, which gives the buyer time to repair his credit before seeking conventional financing.

Source: The Wall Street Journal, June Fletcher (08/28/2009)

Internal Revenue Service plans Audits

Audits Planned for High Mortgage Deductions

The Internal Revenue Service plans to step up its reviews of taxpayers who take the mortgage interest deduction and target some for audit.

The Treasury inspector general for tax administration released a memo Monday announcing plans for the review, pointing out that there are thousands of homeowners who paid more than $20,000 in mortgage interest in 2005 who either failed to file a tax return or reported income that was less than would have been required to pay their mortgage and other basic living expenses.

The move is not without its critics.

"We shouldn't presume that these struggling families are tax cheats just because they continue to make their mortgage payments despite losing their income," says Rep. Charles Boustany (R–La.), the top minority member of the House Oversight Subcommittee.

Source: The Wall Street Journal, Martin Vaughan (09/01/2009)