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Jim Klinge
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Posted by on Oct 28, 2009 in Bailout, Thinking of Buying?, Thinking of Selling? | 28 comments | Print Print

Homebuyer Tax Credit

From CR, here is the summary of what’s on the table:

  • Income eligibility for first-time home buyers stays at $75,000 for individuals, and $150,000 for couples.
  • For move-up buyers, income eligibility is $125,000 for individuals and $250,000 for couples.
  • There is a minimum 5 year residency requirement – in their current home – for move-up home buyers.
  • The tax credit is the lesser of $7,290 or 10% of the purchase price.
  • The credit runs from Dec. 1, 2009 to April 30, 2010, with an additional 60 day period to close escrow. (So end of April to sign contract, end of June to close escrow)
  • Expect bill to be signed by Friday, packaged with the unemployment benefit extension.
  • My prediction?

    1. Buyers and sellers will take the holidays off, and gear up for the mother of all Spring Kicks. 

    Then the sellers, full of optimism but on their last gasp, goose their list price an extra 5% to 10% so they can move up, but the buyers don’t go for it.

    We’ll end up with more over-priced inventory, and a few extra sales.

    A nothing-burger…..or

    2. The REO tsunami finally hits, with new listings priced at 5% under comps dominating the market, crushing the hopes of regular selling getting their extra goose.

    Either way, the flood of sellers should temper sales prices.

    28 Comments

    1. The powers that be,(be eating tax monies)probably will still be able to control the housing weather. I’ll have my nothing-burger medium rare.




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    2. This does provide an opportunity to release some of that REO inventory without prices plummeting.




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    3. Jim,
      another difference from the in-place credit….

      As per Bloomberg News,the proposed extension of the credit also includes the following :

      “The credit would be limited to homes costing $800,000 or less. There is currently no price cap on home purchases”.




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    4. ravinos,

      The final nail in the coffin for RSF prices? 😉




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    5. Why is the income eligibility for first-time buyers so much lower than move-up’s? What’s the purpose?




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    6. I can’t understand an 8k tax credit being a great incentive to purchase a 400k+ house. I’d rather just have price come down 8k rather than getting a credit.

      Another epic fail by congress. Sometimes you can’t help but wonder if they resemble a fish out of water; flailing desperately to make it back to sea.




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    7. We sold our home last year so we aren’t first time homebuyers. Since we are renting now we don’t qualify as move-up buyers. So we still won’t qualify for the homebuyer credit if this is signed on Friday?
      Am I understanding this right?




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    8. That’s what it sounds like, Erin.

      So do you think they’ll require “step up” buyers to sell their current home to get the credit? Because that would put more homes on the market.




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    9. Just about everyone will have to sell to buy, otherwise they’ll have to qualify for both house payments without rental income, per the ‘anti-buy-and-bail’ rule.

      Maybe it’ll just be anyone who had a mortgage on their credit report? It would give investors a crack at buying another.




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    10. Where on earth did they come up with the non-round figure of $7,290? Why didn’t they just leave it at $8,000?




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    11. This is a perfect storm for mortgage and tax fraud. Investor move up buyers will drain these funds FAST.




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    12. The “REO tsunami” will never happen. Banks can wait, in perpetuity with their holdings.

      Thanks to all the skumbag realtor’s for playing along with the banks game.




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    13. How do they define “move-up buyers” in the proposal? Do you have to buy a more expensive house, as in exclude move-down buyers?

      Within the higher income range, they’re ironically rewarding people who already bought (capped at $125K individual) and punishing those who haven’t (capped at $75K individual). Having people trapped between the two cutoffs is even more arbitrary than the old rules. Let’s at least be consistent when discriminating against classes of people.




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    14. hmmm…ok. So I don’t understand why they are expanding this to move-up buyers? (I wish they wouldn’t even continue this credit to begin with….) I can’t even begin to guess the reasoning.




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    15. Money went to the subprime, alt-a then the neg-am market because the mortgage industry all but chewed through their supply. There are so many ‘first time’ buyers so by extending the incentive to ‘move-up’ buyers the air can still be let out slowly.

      Jim, my previous posts did not show up. Do I need to be more constructive with my comments or was it user error?




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    16. “I can’t understand an 8k tax credit being a great incentive to purchase a 400k+ house. I’d rather just have price come down 8k rather than getting a credit.”

      I completely agree with this statement, but I’m always amazed at how people see this as an opportunity they can’t pass up. It’s like jingling a shiny set of keys in front of a baby. I have no doubts people will jump all over this, and the government will again pat themselves on the back.




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    17. Well, assuming you aren’t paying cash, eight grand today is worth a lot more than eight grand over thirty years, which amounts to something like $44 a month at current interest rates. Lots of people, if given a choice between a check for eight grand or a check for $44 a month for thirty years, would choose the eight grand.




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    18. $8K was too small to really influence my decision to buy, but it does matter. It’s an extra 3 months of rent for safety margin on top of what you already have. So I’m more than happy to take free money for something I decided to do anyways.

      Put in perspective, it’s about 1 1/2 points or 3/4 of a percent interest. Nobody should be buying a house simply because interest rates are “cheaper” by 3/4 of a percent interest, but it’s also an extreme to say it doesn’t matter. Lots of factors matter, $8K just happens to be small fry.




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    19. Jim,

      What are your thoughts on the low end re-sale market with all the latest news? Do you think it will remain hot for the next few months?

      Jay




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    20. I really don’t think this credit is targeted at coastal California. The nation is a lot larger than that, and this could be a lot of money in some of the more depressed markets.

      I think there could be areas that could heat up because of this, while others try to heat up but ultimately fizzle out.




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    21. The latest revision, thanks to CR:

      The article states the plan might still change.

      The details:

      Income eligibility for home buyers increases to $125,000 for individuals and $225,000 for couples.

      The tax credit for first-time home buyers (anyone who has not owned in the last 3 years) will be the lesser of $8,000 or 10% of the purchase price.

      For move-up buyers – “who have lived in their current home for at least five years” – the credit would be limited to $6,500.

      The credit runs from Dec. 1, 2009 to April 30, 2010, with an additional 60 day period to close escrow. (So end of April to sign contract, end of June to close escrow)




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    22. Why does the Government hate renters so much? Isn’t government supposed to represent their constituants? Is it fair to take tax dollars from everyone and give it back to a limited few?

      The funny part about this new stimulus is that it’s just a way to give home buyers money when they sell their home. It’s not a way to help new home buyers.




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    23. It meant give home sellers money when they sell




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    24. What if you are a move-up buyer who owned home for the required 5 yrs, but closed in Sept. 2009? Do you think the extention can be applied to homes closing before 12-01-2009? What up with that??




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    25. We also bought a new home in june of 09 taking advantage or lower prices in a better area of town. We had lived in our previous home for 4 years. Do we qualify for some lower amount of rebate or are we SOL?




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    26. With the 2010 new home buyer tax credits extended, and move up credit, we should still see a good market. Even if the banks part out with more REO’s. Good Year ahead




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    27. What are the chances of them extending this until 2011. I am going to need it.




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