02 November 2009

$8k Homebuyers Credit extension? Probable.

A major role in the improved US housing numbers - for resales, which are the major part of the housing market, as well as new construction - has been accredited to the $8,000 First Time Homebuyer Tax Credit. This credit was set to expire on Nov 30, 2009. Realtors supported the buying public strongly by lobbying hard for an extension of the credit, arguing that it helped stabilize the housing market, which in turn is a major economic factor.

Status: Last week, a major hurdle was taken when the Senate came to a - bipartisan! - agreement to extend the measure.

Content of the extension proposal: (1) to qualify, purchase agreements for first-time home-buyers have to be signed by April 30, 2010 and closed by June 30, 2010. Definition of a first-time homebuyer according to the IRS: you did not own a home in the past 3 years.
(2) The tax credit will be 10 percent of the home purchase price, up to $8,000.
(3) New: existing homeowners looking to purchase a different primary residence could be eligible for a tax credit of up to $6,500. Conditions: primary residence “swap”, buyers must have owned their home for five consecutive of the previous eight years, max. purchase price $800,000.
(4) New: qualifying income limits may be increased from $75,000 to $125,000 for singles, and from $150,000 to $225,000 for joint tax filers

Next step: The extension Bill must be reconciled between the House and Senate, and then voted on for final approval.

Next step for prospective homebuyers: Don’t snooze. Mortgage rates could rise, selection will fall. In all local market segments I observe, inventory is being gobbled up (nice segue to Thanksgiving?) from the low end of that segment. The longer you wait, the less selection you will have. And that includes not only condos and the “average” house, but also midcentury and contemporary modern homes.

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