Senate Clears Homebuyer Tax Credit Extension to Pass This Week

Published: Nov. 3, 2009
By Steve Cook Real Estate Economy Watch

After two weeks of delay, the Senate last night cleared the way to pass a seven month extension and expansion of the tax credit for homebuyers. By an 85 to 2 roll call vote, the Senate voted to cut off debate on a package of measures that includes the homebuyer credit, making it virtually certain that the legislation will reach President Obama for his signature this week.

The homebuyer tax credit, due to expire in 28 days, would be extended through April 30 of next year. First-time buyers who are in process of making a purchased would not need to worry about qualifying for the $8,000 credit if they close after the November 30 deadline.

For the first time, the legislation cleared last night makes move-up buyers as well as first-time buyers would be eligible for a credit. The $8,000 maximum first-timer credit will continue and will now available to couples with income up to $225,000, a nearly $55,000 increase above the level in existing law. A new $6,500 maximum credit would also be available to move-up homeowners who have lived in their current residence for five of the prior eight years.

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Senate bill amended to extend, expand credit

By Inman News, Monday, November 2, 2009.

Congress has approved a one-year extension of higher loan limits for mortgages backed by the Federal Housing Administration, Fannie Mae or Freddie Mac, and an amendment that would extend the first-time homebuyer tax credit has been incorporated into a Senate bill to prolong unemployment benefits.

A procedural vote on the unemployment benefit legislation, HR 3548, is expected today, Congressional Quarterly reported, with final passage by the end of the week.

An amendment to the bill, introduced Thursday by majority leader Sen. Harry Reid, D-Nev., would extend the tax credit to apply to homes under contract by May 1. Homebuyers would have to close by July 1 to claim a credit equal to 10 percent of the home’s purchase price, up to $8,000.

That’s the same limit in currently in place for first-time homebuyers claiming a tax credit that’s scheduled to expire Nov. 30.

But Reid’s amendment would also expand the tax credit to allow longtime residents of the same principal residence to claim a tax credit of up to $6,500. Homebuyers would have to have owned and used their principal residence for any five-consecutive-year period during the past eight years to claim the exception for longtime residents.

The amendment would also expand income limits from $75,000 to $125,000 for individuals and from $125,000 to $250,000 for couples, but the credit could not be claimed on purchases of homes exceeding $800,000. The amendment would also set a minimum age requirement of 18 to claim the credit.

The extension is supported by the Obama administration, which also urged Congress last week to approve a one-year extension of the temporary $729,750 loan limit in high-cost housing markets for mortgages backed by FHA, Fannie Mae or Freddie Mac.

The House and Senate passed a resolution Thursday to extend the limits through 2010, which the Obama administration was expected to sign on Friday or Saturday, the National Association of Realtors said in welcoming the move by lawmakers.

FHA, Fannie and Freddie will continue to be authorized to guarantee loans of up to 125 percent of local median home sales prices, up to a maximum of $729,750 in high-cost areas. The floor for FHA in normal markets will remain $271,050, and $417,000 for Fannie Mae and Freddie Mac.

In a statement, NAR President Charles McMillan said the higher limits will help motivate qualified buyers to purchase homes in the middle-income and higher brackets, which have not shown the same improvement in recent months as homes at the lower end of the price spectrum.

Why buy now?

Aggressive pricing
Record low interest rates
Your buying power will never be greater

As a long-term investment, homeownership is one of the best investments for individual households. All markets including the housing market have their ups and downs. The homeownership market has a track record that is unmatched by any other purchase in terms of its benefits.

If you have good credit, a job and steady income, there are plenty of mortgage lenders willing to underwrite a mortgage loan at good rates. Here is an example of why, dollar for dollar, homeownership is a stepping stone for a future of financial security and the single largest creator of wealth of many Americans.

Over the long-term, real estate has been consistently appreciating, even through periodic adjustments in local markets in response to economic conditions.

Let’s look at purchasing a $200,000 home with 10% down for an investment of $20,000. Consider that you might appreciate 5% per year, and that $200,000 home would be worth $10,000 more the first year of ownership. Earning $10,000 on an investment of $20,000 is an extraordinary 50 percent annual return.

In contrast, putting that $20,000 down payment into the stock market and getting a 5% gain would only yield a $1,000 profit.


It’s a Seller’s Market … really.

With all the talk about buyers, and the $8,000 tax credit, and the low interest rates, you might be surprised to learn that there’s truly a seller’s market in Lincoln today.

Consider this: the first-time buyers are indeed shopping, and they’re buying the homes that are ready to sell. What do those homes look like? They’re clean/updated/show-ready, and they’re priced correctly. Savvy sellers understand this, and they also understand the ‘back half’ of that equation. With their house now under contract to a first-time buyer, that seller now becomes a buyer, too. And while they can’t take advantage of the tax credit, their buying power is now increased with a low interest rate. And if they’re in a position to move up (buy something bigger/more expensive), they’ve got plenty of homes to choose from. And once again, the homes in those price ranges that are clean/updated/show-ready and priced right … are selling.

Sellers — would your current home be a good first house for a young buyer? If so, you’ve got an incredible opportunity. Will you take advantage of it?

Why NOW is a Great Time to Buy a Home

Excerpted from Strictly Business Magazine:

With all the talk about the economy these days, it’s easy to start assuming it’s only prudent to hunker down and ride out the storm, spending as little money as possible and making as few changes as possible. Many people have this knee-jerk reaction even if the supposed ‘bad economy’ isn’t affecting them personally. Even if their business is doing well, they have plenty of money in the bank and there is no trouble on the horizon, they assume things will get bad soon and so they alter their lifestyles. Unfortunately, this has been the case when it comes to the housing market. It seems that every time you turn on the television, you hear something about how bad the market is. This causes a general feeling of fear and people naturally start assuming they should not even consider buying or selling a home in this market. They often don’t even do any research or talk to professionals who can answer questions about the local market, they simply assume.

The truth is, the local housing market in Lincoln is not nearly as bad as the news would have you believe. In fact, it can be a very good market if you are in a position to buy. Consider the following information from the REALTORS Association of Lincoln:

What’s the NATIONAL weather for today?

Suppose you turned on the Weather Channel and were given only a national forecast for the day? You might find yourself dressing for Arizona instead of Nebraska!

Over the past year there has been some dreary news about the nation’s real estate market; yet, no single real estate market exists. Real estate is a local phenomenon, just like the weather.

Continue reading “Why NOW is a Great Time to Buy a Home”

Buying up in a down market

Did you know that it is better to move to a bigger home in a “down” market than it is in an “up” or even a stable market? Because most people sell their current home before they buy a bigger one, they tend to look at the transaction from the seller’s standpoint. They see the loss they may take on their current home and decide it is wise to wait for the market to improve.

But take a moment to consider this scenario.

Your home was worth $120,000 last year. If the market were down 5 percent, this year your home should bring $114,000, or $6,000 less than it would have last year.

Now suppose the home you will buy would have sold for $180,000 before the market slowed down. With the market down 5 percent, that home is likely to bring $171,000 this year, or a savings (to the buyer) of $9,000! So, as the person in the transaction moving up, you have saved a net of $3,000! Surprised? It is surprising! Down markets are the ideal time to make your move up to a larger home.

If moving to a larger home is in your plans, contact a Realtor now! There has never been a better time to get started.

Information adapted from David Knox: Pricing Your Home to Sell.

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