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From the WSJ:

The real-estate lobby wants Congress to extend the amount of time that potential home buyers have to complete transactions that qualify for the $8,000 federal home-buyer tax credit.

To qualify for the tax credit, buyers had to sign purchase agreements by April 30.  Those buyers have until the end of June to close on those sales, and anything that closes after that wouldn’t get the tax credit.

The problem, says the National Association of Realtors, is that many of those signed contracts are on foreclosures and short sales, where the lender allows the house to sell for less than the amount owed to the bank. Those transactions take longer than normal to process, and there’s some concern that many sales may not actually close in time.

“There could be a sizable number of home buyers who responded to tax credit incentives, but may encounter problems,” said Lawrence Yun, the trade group’s chief economist, in Wednesday’s report that showed a 6% surge in pending home sales during April.

The NAR and its members are asking Congress for flexibility with the June 30 deadline, but it is unclear when—or even if—something would happen. (The National Association of Home Builders says it is not asking for a deadline tweak.) Congress would have to pass such a measure quickly, which is no easy task. One possibility would be to attach the extension to a piece of legislation that’s already winding its way through both chambers.

Last week, Congress went into the Memorial Day recess without completing a bill to authorize new funding for the USDA’s rural development loan program, which lets some home buyers tap 100% financing.  Without a last-minute reprieve, all would-be buyers can do is push for the different parties to close the deal in time.

State Tax-Credit Update

The $100 million in tax-credit money is holding up OK. If every applicant got the full $10,000, we’re about a quarter of the way done, after nine business days:

Applications for First-Time Buyer Credit received as of 5/13/2010:

The State of California’s tax credit amount is 5% of the sales price, or $10,000, whichever is less. 

Because the state thinks that not every buyer will qualify for the entire $10,000, they are only reducing the tally of available money by $5,700 per applicant, and will figure it out later.  There will likely be some angry applicants at the end:

From the State of California:

http://www.ftb.ca.gov/individuals/new_home_credit.shtml

The figures shown below are only estimates, based on small samples. The numbers are overstated as there will be duplicate, revised, and invalid applications included as we have not verified any of the applications. These estimates are only provided to give a general idea of the number of applications received and the amount requested for the First-Time Buyer Credit. We are showing 57% of the estimated requested credit since the $100 million cap will only be reduced by 57% of the credit allocated to the buyer. The amounts do not reflect actual amounts which will be allocated. These estimates will be updated each Thursday until we are sure that we have received more than enough applications to allocate the full $100 million. Once we determine that we have received sufficient applications to allocate the full $100 million, we will stop accepting applications for the First-Time Buyer Credit. Estimates for the New Home Credit will be provided once our computer system is completed.

Applications for received as of 05/04/10:  427

57% of Estimated Requested Credit: $2,350,708

Here’s a larger set of weekly pendings, hoping to quantify the impact of the state housing tax credit on detached sales in San Diego County. 

Number of New Detached Pendings

After enjoying a 39% increase in sales, year-to-date (wasn’t it 44% the other day?) the North SD County Coastal pendings actually tapered off the last couple of weeks, once you subtract for expected fall-outs. 

The late push during the last two weeks to secure a binding contract before the finish of the federal tax credit might result in an extra 100-150 sales county-wide, at best.  It could end up being much less.

The overall impact on county sales from the tax credit?  Let’s compare year-over-year the pendings between Jan 1st and April 30th.

2009 = 7,827 all closed

2010 = 8,009 (4,472 closed, 3,537 pendings)

There were 1,415 of the 3,537 marked pending since April 15th, and still in their 17-day contingency period. If a third of those fall out of escrow (467), we’d be behind last year’s total sales.  If we see half of the 2,536 contingent listings close, it would get us up to 8,810 closings, a mere 13% improvment in sales from 2009.  You could say the tax credit didn’t help much.

Many realtors practice the “win-lose” way.  They’ll stand in the way of creating a win-win solution so all parties are satisfied, and instead bury the other party every chance they get. 

Take the dishwasher story for example.  I mentioned earlier about the listing agent who went berserk over our request for a new dishwasher, which, of course, was then denied by the sellers.  They did agree to a couple of repair requests, but cut corners on those and then said if you don’t like it too bad.  Then once it closed, the agent wouldn’t meet me to hand over the keys, and I had to get a locksmith to gain entry.  There was no remorse.

It’s those types of agents that don’t get i,t about this being a cooperative business. 

Don’t be surprised if we hear some stories about the new California Homebuyer Tax Credit form not being completed in a timely fashion.  According to the instructions, the sellers have 14 days to complete the tax-credit form (including their social security numbers), and return to the buyers.  The knucklehead agents who delay the return of the form are going to cost some buyers their tax credit, and $10,000.

Here are the links:

INSTRUCTIONS
http://www.ftb.ca.gov/individuals/new_home_credit.shtml

FORM
http://www.ftb.ca.gov/forms/2010/10_3549a.pdf

My guess is May 27th as to how soon the $100 million will be used.  Beginning May 6th, they are going to have a countdown clock too! 

Here are other facts from the ‘instructions’ link:

The total amount of allocated tax credit for all taxpayers may not exceed $100 million for the New Home Credit and $100 million for the First-Time Buyer Credit. However, since many taxpayers will not be able to utilize the entire tax credit, the legislation specifies that the $100 million cap for the New Home Credit will be reduced by 70 percent of the tax credit allocated to each buyer and the $100 million cap for the First-Time Buyer Credit will be reduced by 57 percent of the tax credit allocated to each buyer. For example, if a taxpayer is allocated $10,000 for the New Home Credit, the $100 million cap for the New Home Credit will only be reduced by $7,000. If a taxpayer is allocated $10,000 for the First-Time Buyer Credit, the $100 million cap for the First-Time Buyer Credit will only be reduced by $5,700. The 70 and 57 percent reductions do not impact the amount that can be claimed by the taxpayer.

We will allocate the tax credits on a first-come, first-served basis.  We expect it to take 3-6 months to notify taxpayers after an application or reservation is received. We need to develop a computer system to capture, verify, reserve or allocate, issue letters, and track the credits. Please be patient and do not fax an application more than once. Since the First-Time Buyer Credit is expected to be used up very quickly, we will provide estimates, based on sampling, of the number of First-Time Buyer applications and the related credit amounts that we have received beginning May 6, 2010.  This will allow First-Time Buyers to estimate whether they will be able to apply for the credit and allow us to determine when we have received enough applications to fully allocate the $100 million and stop accepting First-Time Buyer applications. Since the New Home Credit is not expected to be used up as quickly, we will wait until approximately mid-July after our computer system is available to post information about the New Home Credit usage. (Updated 04/28/10)

Only one tax credit is allowed per taxpayer. If a taxpayer qualifies for both tax credits, the law specifies that we will allocate the amount under the New Home Credit.

To qualify for the $8,000 federal tax credit, buyers have to secure a “binding” contract by the end of today, and close escrow prior to June 30th. 

Has there been a mad rush over the last week to lock down a contract?  Yes, buyers are looking feverishly, but it doesn’t look like many are buying just because of the tax credit – it still has to be the right house.

Here are the numbers of detached listings that have been marked pending over the first four days of this week, compared to all five days of last week – we’ll check back next week to see how many were marked pending, dated today (or backdated over the weekend):

In the end, both the federal and state tax credit will be bonus money for buyers who happened to be in the right place, at the right time.

There has been a real push to extend escrows that were originally planned to close in April, into May to be eligble for the state tax credit too.  In a couple of weeks we’ll look back and see how the first-week-of-May closings compared to last year, but it’ll be hard to determine how many closed just because of the state tax credit – because in North SD County Coastal the detached sales have been much stronger this year overall:

A 44% increase in North SD County Coastal detached sales, year-over-year!

Let’s keep a running tally of new pendings/contingents up to April 30th, to see if there is a last-minute surge to buy before the housing-tax-credit deadline.

Detached listings:

A pricing convergence; the all-county trend is upward, while north coastal pricing is coming down. The Active-to-Pending/Cont ratio is cooking in both; 1.02 in the county, and 2.40 in north coastal.

C.A.R. whipping up some frenzy….

The $100 million allocated for California’s first-time homebuyer tax credits may be depleted in about 10 to 20 days or sooner, according to C.A.R.’s Economics team.

California’s Franchise Tax Board (FTB) plans to begin accepting applications on May 1, 2010 for tax credits up to $10,000 for first-time homebuyers and for homes that have never been previously occupied.  However, the total tax credit allocation for all taxpayers is $100 million for first-time homebuyers and $100 million for new homes, both on a first-come, first-served basis.

C.A.R.’s forecast of 10 to 20 days to deplete the $100 million allocation for first-time home buyers is based on estimated May sales figures and other parameters.  It does not take into account the possibility that buyers scheduled to close escrow in April may delay closing until May to take advantage of the tax credit.  If a shift in closings from April to May occurs, the first-time homebuyer tax credits may be depleted even more quickly than indicated above.

Applications for the California tax credit must be faxed to the FTB after escrow closes.  The FTB will update its website when the 2010 application form and other information become available:

REALTORS® are reminded not to give their clients any tax or legal advice, such as the availability of funds under the California tax credit program.  Agents should encourage their clients to seek specific advice from an accountant, attorney, or other professional as they deem appropriate.

C.A.R. Housing Tax Credit Worksheet

Details on the 2010 California Tax Credit were released today, click here for the link to the ftb.gov website for the whole package:

http://www.ftb.ca.gov/individuals/New_Home_Credit.shtml

 Here are the highlights: 

The New Home / First-Time Buyer Credits are available only for purchases that close escrow on or after May 1, 2010. 

Applying for the 2010 New Home/First Time Buyer tax credits:  Applications must be submitted after escrow closes. The new application will be available by May 1, 2010.  We will deny the application if the 2009 form is used or if we receive the 2010 application before May 1, 2010.

General Information: These tax credits are available for taxpayers who purchase a qualified principal residence on or after May 1, 2010, and before January 1, 2011. Additionally, the New Home Credit is available for taxpayers who purchase a qualified principal residence on or after December 31, 2010, and before August 1, 2011, pursuant to an enforceable contract executed on or before December 31, 2010.  The purchase date is defined as the date escrow closes.

These tax credits are limited to the lesser of 5 percent of the purchase price or $10,000 for a qualified principal residence. Taxpayers must apply the total tax credit in equal amounts over 3 successive tax years (maximum of $3,333 per year) beginning with the tax year in which the home is purchased. The tax credits cannot reduce regular tax below tentative minimum tax (TMT). The tax credits are nonrefundable and unused credits cannot be carried over.

The total amount of allocated tax credit for all taxpayers may not exceed $100 million for the New Home Credit and $100 million for the First-Time Buyer Credit. However, since many taxpayers will not be able to utilize the entire tax credit, the legislation specifies that the $100 million cap for the New Home Credit will be reduced by 70 percent of the tax credit allocated to each buyer and the $100 million cap for the First-Time Buyer Credit will be reduced by 57 percent of the tax credit allocated to each buyer. We will allocate the tax credits on a first-come, first-served basis. 

Only one tax credit is allowed per taxpayer. If a taxpayer qualifies for both tax credits, the law specifies that we will allocate the amount under the New Home Credit.

Taxpayers will not be eligible for either tax credit if any of the following apply:

• The taxpayer was allowed a 2009 New Home Credit.
• The taxpayer is under 18 years old. (A taxpayer who is married as of the date of purchase will be considered to be 18 if the spouse/registered domestic partner (RDP) of the taxpayer is 18 or older on the date of purchase.)
• The taxpayer or the taxpayer’s spouse/RDP is related to the seller.
• The taxpayer qualifies as a dependent of any other taxpayer for the tax year of the purchase.

First-Time Buyer Credit:  A qualified principal residence, for purposes of the First-Time Buyer Credit, must:

• Be a single family residence, either detached or attached.
• Be eligible for the California property tax homeowner’s exemption.
• Be occupied by the taxpayer as their principal residence for a minimum of 2 years immediately following the purchase.

A first-time buyer is any individual (and the individual’s spouse/RDP, if married) who did not have an ownership interest in a principal residence during the preceding 3 year period ending on the date of the purchase of the qualified principal residence.

If you are only applying for the First-Time Buyer Credit, you will not be able to reserve the tax credit before escrow closes.

Claiming the tax credit:

• The taxpayer must receive a Certificate of Allocation from us to claim the tax credit on their California personal income tax return. The Certificate of Allocation will state the maximum amount the taxpayer can claim listed by tax year.
• The taxpayer should refer to the 2010 New Home / First-Time Buyer Credit Publication for instructions on claiming the tax credit (the publication will be available by December, 2010).
• Special rules apply to married/RDP taxpayers filing separately, in which case each spouse/RDP is entitled to one-half of the tax credit, even if their ownership percentages are not equal. For 2 or more taxpayers who are not married/RDP, the tax credit amount will have already been allocated to each taxpayer occupying the residence on their respective tax credit allocation letter.
• If the available tax credit exceeds the current year net tax, the unused tax credit may not be carried over to the following tax year.
• The tax credit may not reduce regular tax below TMT.
• The tax credit is not refundable.
• Any disallowance of the tax credit may not be protested or appealed.

Thanks to Mark for sending along this confirmation of first-time home buyers being able to claim both the federal and state tax credits, from the WSJ:

But, it might not get off to a peaceful start on May 1: Get ready for a stampede early on as some buyers rush to overlap with the federal tax credit that’s dangling as much as $8,000 to buyers. (Yes, that’s up to $18,000 for buying a house.)

For the federal incentive, contracts must be inked by April 30, while closings have to happen by June 30. The California credit covers closings on existing or new homes on or after May 1, leaving a short window for double dipping. “We already anticipated increased contract activity in March and April due to the federal tax credit with scheduled closings in May and June,” writes Credit Suisse builder analyst Dan Oppenheim. “These buyers will now be eligible for both the federal and state credit and will likely consume a significant piece of the state credit given the first-come, first-serve allocation.”

He estimates the tax credit will benefit about 14,000 new-home buyers, lasting as long as five months. KB Home and Lennar could benefit the most given “their outsized exposure to California at 44% and 25% of ’09 revenues, respectively, vs. the 20% group average.”

Given that the state’s existing sales dwarf new sales – 2009 saw an average of 42,500 closings per month - that allotment should be snapped up in about a month. Stampede, indeed.