Home Buyer Tax Credit: Final Deal?

Home Buyer Tax Credit: Final Deal?
Published: Thursday, 29 Oct 2009 | 11:18 AM ET Text Size By: Diana Olick
CNBC Real Estate Reporter

For those of you keeping score on the first time home buyer tax credit extension, here is the latest:

— The tax credit would be $8,000 for first-time home buyers and $6,500 for move-up buyers (from December 1, 2009 to April 30, 2010).

— Move-up buyers will be eligible, so long as the home they are leaving has been used as their principal residence for 5 years or more.

— The tax credit would sunset on April 30, 2010. However, there would a binding contract rule that will permit those with contracts as of April 30th to qualify for the credit so long as they complete the transaction within 60 days.

— The income limits for both first-time home buyers and move-up buyers would be $125,000 for single return and $225,000 joint return.

— Cost of the home may not exceed $800,000 to be eligible.

— For purchases made in 2010, taxpayers would be able to claim the credit on their 2009 income tax return.

— Home buyers would not have to repay the credit, provided the home remains their principal residence for 36 months after the purchase date.

— The amendment includes a military waiver provision, meaning the recapture provision would not apply in the case of a member of the Armed Forces, military intelligence or Foreign Service who is on qualified official extended duty. In addition, members of the military who have been deployed overseas for 90 days or more in 2008 or 2009 would have until April 30, 2011, to claim the home buyer tax credit.

— The amendment also includes anti-fraud language that provides math authority to the IRS to do greater oversight during the processing of the return rather than waiting for an audit situation. The amendment requires the taxpayer claiming the credit to be 18 or older as well as requiring a HUD-1 settlement statement to be attached when claiming the credit.

AND supposedly, sometime after 11a, the Treasury and HUD Secretaries will officially call on Congress to extend the credit and the higher conforming loan limits.

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Weekly Market Report for The Twin Cities Real Estate Market

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The end of the first-time home buyers tax credit looms just 30 days beyond a Halloween horizon, and home sales remain strong in the lead-up to tricks and treats and the impending tax credit DEADline. For the week ending October 17, there were 954 signed purchase agreements, howling up 54.4 percent from a year ago. Almost two-thirds of these pending sales were priced below $190,000—evidence that first-time buyers are carrying a heavy share of the activity.

The strong sales we've seen over the last 15 months mean that our inventory of available homes has shrunk like the heads in a witches' brew. The 23,896 homes on the market right now represents a 21.2 percent decrease from the decidedly more scary market of 2008, and it is the lowest mark at this point in the year since 2004.

Expect home sales to begin dropping as tax credit qualifiers finish their mad rush to the closing table, but unlike those camp counselors at Crystal Lake, we'll all make it out of this market alive.

-MAAR

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Explore Loan Workout Solutions to Avoid Foreclosure

First and foremost, if you can keep your mortgage current, do so. However, if you find that you are unable to make your mortgage payments, you may qualify for a loan workout option. Check with your lender to find out which of these options (or others) may be available.
Reinstatement: Your lender may be willing to discuss accepting the total amount owed to them in a lump sum by a specific date. They will often combine this option with a forbearance.

Forbearance: Your lender may allow you to reduce or suspend payments for a short period of time after which another option must be agreed upon to bring your loan current. A forbearance option is often combined with a reinstatement when you know you will have enough money to bring the account current at a specific time in the future. The money might come from a hiring bonus, investment, insurance settlement, or a tax refund.

Repayment Plan: You may be able to get an agreement to resume making your regular monthly payments, in addition to a portion of the past due payments each month until you are caught up.
If it appears that your situation is long-term or will permanently affect your ability to bring your account current:

Mortgage Modification: If you can make the payments on your loan, but you do not have enough money to bring your account current or you cannot afford the total amount of your current payment, your lender may be able to change one or more terms of your original loan to make the payments more affordable. Your loan could be permanently changed in one or more of the following ways:

Adding the missed payments to the existing loan balance.
Changing the interest rate, including making an adjustable rate into a fixed rate.
Extending the number of years you have to repay.

Claim Advance: If your mortgage is insured, you may qualify for an interest-free loan from your mortgage guarantor to bring your account current. The repayment of this loan may be delayed for several years.

Some workout options include expenses that you will be expected to pay, such as recording fees for a loan modification. Because every situation is different, you should be sure that you understand all the fees before signing any papers. To minimize the costs and particularly legal fees which can be very expensive, call your lender as soon as you realize you may be in trouble.

Information from www.hud.gov

FHA Taking Steps to Ensure Taxpayer Money

FHA Taking Steps to Ensure Taxpayer Money during Housing Crisis
Washington, September 18, 2009

The following is a statement by National Association of Realtors® President Charles McMillan:

“The Federal Housing Administration is playing a crucial role in providing mortgage financing to the housing market, as mortgage and banking systems have faced collapse. While FHA’s capital reserve ratio has declined, that is not surprising for an agency dealing in housing finance in today’s market, and there is no sign that a taxpayer bail-out will be required. FHA stands in contrast to entities in the private sector, including Fannie Mae, Freddie Mac and many large banks that have needed tens of billions of dollars in federal funds.

“Under the leadership of Commissioner Dave Stevens, FHA has announced timely steps to protect taxpayers: implementing credit policy changes to enhance risk management; hiring a chief risk officer for the first time in the agency’s history; shifting responsibility for mortgage brokers away from taxpayers to the lenders who use mortgage brokers; and modifying appraisal requirements including emphasizing appraiser independence and geographic competence.

“Declining home prices have forced many homeowners into underwater positions, regardless of lender or loan product. FHA is still solvent, has significant reserves and remains an essential tool for consumers.”

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.

The October Skinny Video Update (Twin Cities Real Estate Market)

-MAAR's The Skinny

Weekly Twin Cities Real Estate Market Report

Click Here For Full Report
The fall Twin Cities housing market has been full of wild things, mostly first-time home buyers stampeding to take advantage of the federal tax credit before it expires on November 30. The week ending October 10 was no different than others we've seen this fall. There were 947 signed purchase agreements for the week, a 37.6 percent increase over the same week last year.

At 1,543 new listings we're down 4.4 percent from the same week a year ago. The trend continues: New listings haven't been keeping up with the amount of sales, bringing total housing supply down dramatically in the Twin Cities. There are currently 24,901 homes on the market, 21.0 percent less than a year ago.

The rumpus is likely to subside as we near the November 30 tax credit deadline, silencing the sales activity of the market's most active buyers.

-MAAR's The Skinny

Tick Tock On The Tax Credit Means More "Last Call" Buyers

Tick Tock On The Tax Credit Means More "Last Call" Buyers

Buyer activity took a step up in September as the final days of the federal tax credit for first-time home buyers ticked toward a November 30 deadline, contrary to the typical September slowdown in the Twin Cities housing market.

There were 4,986 signed purchase agreements during the month, up 23.5 percent from a year ago—the 15th consecutive month of year-over-year increases in pending sales. Since first-time home buyers don't typically go high end, a healthy portion of these sales are taking place in price ranges below $200,000.

The influx of new buyers has helped home prices increase over the course of the year. The September median sales price of $170,000 represents a slight dip from the prior month, but the dip is less extreme than what has been typical. Compared to last September, it's a 10.5 percent decline—the lowest year-over-year decline in 17 months.

The median sales price of traditional homes in September was $200,712, down 5.3 percent from a year ago. Lender-mediated homes posted a September figure of $127,000, down 12.4 percent from a year ago. Lender-mediated foreclosures and short sales made up 39.2 percent of the month's pending sales.

Foreclosures are being sold roughly three times more frequently than short sales, thus the inventory of available foreclosures is dropping more quickly than short sales.

-MAAR

Weekly Market Report for The Twin Cities Real Estate Market

Weekly Market Activity Report

Autumn may be bringing colder temperatures (and snow, too: what's up with that?!?) but the Twin Cities housing market is still hot. Contrary to the typical fall slowdown, pending sales are gaining weekly momentum as home buyers take advantage of the final days of the Federal tax credit.

For the week ending October 3, signed purchase agreements were a stunning 61.2% higher than last year, jumping from 647 to 1,043. New listings are a different story, however, down 8.0% below the previous year. Total active listings remain sluggish compared to a year ago, with the 24,354 on the market representing a 20.9% drop from a year ago.

There are some new stats this week that help bring some perspective on just how much better things have gotten for sellers in the last year:

Days on Market Until Sale: at 129 days is 11 percent below last year.
Percent of Original List Price Received at Sale: at 93.9% is 1.8 percent higher than last year.
Months Supply of Inventory: at 6.6 is 30.5% lower than last year and is closer to a balanced market.
All three indicators are important reflections of market shift. Yet we can't minimize that sellers still face tough conditions, especially in the higher price ranges where sales are still on a downward trend.

Weekly Twin Cities Weekly Market Report

Fall is officially on in the Twin Cities, but it hasn't slowed the housing market as much as usual. After the school year begins, we typically see a drop in buyer activity, but the 2009 fall market is remaining robust due in large part to the final weeks of the tax credit for first-time home buyers. There were 1,056 pending sales for the week ending September 26, up 41 percent from the same week last year.

As a direct result, inventory is dropping like a stone. There are approximately 24,500 homes for sale in the 13-county metro area, down more than 20 percent from a year ago.

The October 2009 Supply-Demand Ratio (SDR) comes in at 6.88 houses per buyer, down 22.5 percent from last year. The SDR has shown year-over-year drops of 30 percent or more for the past few months, but we're projecting that the year-over-year decline for October will be smaller because pending sales are likely to be significantly lower if the federal tax credit for first-time buyers is not extended. If the credit goes *poof*, it will remove buyers from the market.

Twin Cities Weekly Real Estate Market Report

Click Here For Full Report
The Labor Day fluctuations came and went, and the Twin Cities housing market is better for it. Pending sales for the week ending September 13 rose dramatically to 1,043, which is 33.5 percent above last year's total for the same week. We must assume that a healthy chunk of this buyer activity can be attributed to first-time home buyers taking advantage of the tax credit before it expires on November 30.

New listings came in at 1,846, up 3.2 percent in a year-over-year comparison. Home sellers have recognized a window of opportunity in recent months and are listing with a little more frequency, but the overall inventory of houses for sale is still below that of the last three years and our Supply-Demand Ratio (which measures the number of houses available per buyer) remains 30.3 percent better than where we were a year ago.