American Recovery and Reinvestment Act of 2009 Offers Good News for Home Buyers and Homeowners

American Recovery and Reinvestment Act of 2009 Offers Good News for Home Buyers and Homeowners
The new $787 billion American Recovery and Reinvestment Act of 2009 will help home buyers, as well as homeowners. The following is a summary of the bill’s positive housing provisions:

Home Buyer Tax Credit—Under the bill, first-time home buyers can receive a tax credit for 10 percent of the value of a home, up to $8,000, which is a great incentive to purchase a home. The tax credit applies to first-time buyers (i.e., consumers who haven’t been a homeowner in the past three years) who purchase a home from Jan. 1, 2009 to Dec. 1, 2009. Buyers don’t need to repay the tax credit unless they sell their home within three years. The credit begins phasing out for couples with incomes above $150,000 and individuals with incomes above $75,000. To obtain the credit, buyers claim it on their tax return, which will reduce their income tax liability. According to the National Association of REALTORS®, this tax credit should result in an increase of 300,000 home sales for first-time buyers in 2009 and also will boost trade-up purchases.

FHA, Fannie Mae, and Freddie Mac Loan Limits—The bill reinstates higher loan limits for FHA, Fannie Mae, and Freddie Mac that were first introduced in 2008, making loans more affordable for consumers no matter where they live. The limits are equal to the greater of 125 percent of the 2008 local area median home price or $271,050 for FHA, and $417,000 for Fannie Mae and Freddie Mac with an overall maximum limit of $729,750. These limits will expire on Dec. 31, 2009. These higher loan limits give consumers more options: More people will be able to lock-in lower interest rates to purchase a home and more people will be able to refinance at a lower rate.

Neighborhood Stabilization—An additional $2 billion in funding for the Neighborhood Stabilization Program will enable local governments to purchase, manage, and repair foreclosed and abandoned properties and sell them to home buyers at affordable prices. This provision is designed to protect communities across the country, reduce inventory, and preserve home values from further decline.

Low-Income Housing Grants—The bill allows states to trade in a portion of their 2009 low-income housing tax credits for Treasury grants to finance the construction or acquisition and rehabilitation of low-income housing.

Tax-Exempt Housing Bonds—Tax-exempt interest earned on specified state and local housing bonds issued during 2009 and 2010 will not be subject to the Alternative Minimum Tax.

Energy-Efficient Housing—The bill promotes green jobs and energy independence and invests in efforts to make homes and buildings more energy efficient. Through 2010, homeowners will be able to claim a 30 percent tax credit (up from 10 percent) for purchases of new energy-efficient exterior doors and windows, insulation, heat pumps, furnaces, central air conditioners, and water heaters. Additional funding also will be provided for weatherization assistance for low-income households and to modernize the country’s electricity grid and install smart meters on homes that will save consumers money.

The National Association of REALTORS® predicts that the first-time home buyer tax credit, subsequent trade-up buying, higher loan limits, and historically low mortgage interest rates could result in an increase of 850,000 home sales in 2009. The association also expects that the country’s 75 million homeowners will benefit because home prices will stabilize possibly in the latter part of the year, which is much sooner than originally predicted by economists.

A marketing flier for consumers about the Recovery and Reinvestment Act is posted on Coldwell Banker Burnet’s Web site CBBurnet.com. Look for the rotating banner ads on the right side of the home page and click on the banner entitled “$8,000 Home Buyer Tax Credit.”

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