Looking Out From the Garage

Don't drag your feet. 

If you are planning on taking advantage of the Home Buyer Tax Credits (either the $8,000 First Time or $6,500 Existing Home Buyer Tax Credit), time is running short.  The credit expires for buyer not under contract as of Saturday, 30 April, 2010. 

That means that you HAVE to be UNDER CONTRACT... not just have an offer...

I have had a couple of buyers think that they could put in an offer and then negotiate it in May...  No.  There has to be a Binding Agreement on or before 30 April, 2010 (unless you are Active Duty Military... you then have an extra year). 

And then comes the next hurdle...

The sale HAS to close by 30 June, 2010.  In effect, this puts the vast majority of Short Sales out of reach.  The average time for a Short Sale to go from Binding Agreement to Closing is over 4 months.  Generally, Foreclosures should be Ok... IF you can get the bank to respond in the next two weeks.  Some of the banks are slow to respond, and if there are several rounds to the offer before it is finalized, time could run out. 

Don't look for another extension...

Honestly, this has NOT been a good deal for taxpayers.  The incremental increase in sales (sales that would not have happened except because of the tax credit) are less than one in 5.  That means that there are more than $40,000 in tax credits for each sale "created" by the credit.  Political will is waning.  The numbers are waning, too.  The last credit converted more buyers.  Even the National Association of REALTORS doesn't seem to be pushing for a renewal of the credit at this time. 

Maybe the Tax Credit isn't that important for you...

I think there will be some deals for buyers after the expiration of the credit.  For some buyers, especially those that are making significant downpayments, waiting might be a good strategy... but don't expect an immediate impact on prices.  And there is always the 'risk' that prices will remain stable and the opportunity will pass with the expiration of the tax credit. 

The other danger we face from waiting is an increase in interest rates.  There are a few factors that point to significant increases in interest rates over the next few months. 

If you are in the market now...

Give me a call.  Let's see if we can find the right property for you.  You can even jump into my property search below on the left...

Do you know what those initials (FTHBTC) stand for? 

First Time Home Buyer Tax Credit...

If you aren't already familiar with it, it might be gone before you get a chance to get more familiar...  It is currently slated to expire at the end of November.  And the clock is ticking. 

In a nutshell, the First Time Home Buyer Tax Credit is the governments way to push a few first time home buyers (people that haven't owned a home for 36+ months) off of the fence and get them buying sooner rather than later.  It is $8000, in form of a refundable tax credit, for those targeted buyers if they buy a qualifying home.. and don't earn over the income caps. 

There are a LOT of posts written about the tax credit... this post is about the clock.  Or calendar, rather. 

While talking with one of my "Go To" Mortgage Gurus, the subject of mortgage application turn times came up.  He is up to his eyeballs in applications, as are other Mortgage Originators.  They are currently turning from application to close in about 21 days... 

The credit is slated to expire on November 30th... about 33 days from now.  Given that most homes take a few days to negotiate, time is short... 

Scratch all of that... 

Alright, literally as I wrote the last line I got word that the credit is likely to be extended until April of 2010.  The details haven't been hammered out yet, but it looks like the credit will survive for a few more months... 

Nevermind. 

But, don't wait until the last minute.  Over the last few weeks we have seen homes in multiple offer situations.  We have seen a little inflating of entry level home prices.  Acting sooner, rather than later, might be a good idea... things usually slow during the winter here.

I have recieved emails this morning from the NAR and from my local association regarding the $8,000 First Time Home Buyer Tax Credit.  There is a full court press from the National Association of Realtors as well as the local associations to not only continue, but expand this program.  And there is NO doubt that the program has been effective, especially in the last few weeks.  Entry level home sales are up. 

But, honestly... it needs to end as scheduled. 

But it is helping my business...

I can hear some of my real estate agent friends saying that very thing.  That is the basis of why the NAR wants to continue the program...  But, we really need to examine the long term implications of what we are doing.  NOT paying attention to the long term implications of current actions are what made this problem to begin with... 

Whether you think that the bubble was caused by the Community Reinvestment Act, Fannie and Freddie pushing for lower and lower barrier to home ownership, out of control credit markets or even just people buying more home than they could afford... thinking that they could always bail out for more money... it is obvious that nobody had their eyes on the future. 

And there is an solid fact... the market is going to find its bottom, and then begin recovery.  No matter how the government intervenes, the market HAS to find a REAL bottom... a place where people look at their situation, and see that homes look like a deal and they feel like it is time to jump. 

Many think that the initial $8,000 FTHBTC short circuited the process and gave the market a bottom.  But, there are some economists that think the bottom was happening anyway... others think that prices may go down after the tax credit expires. 

If prices may go down when the tax credit expires... we need to keep it!

Newsflash.  If we aren't at the bottom, and prossibly even if we were, prices will likely go down when the tax credit expires.  Demand has been juiced in the last few weeks because of the immediacy of the tax credit expiring.  That has eaten a little of the supply and buoyed prices.  If the Tax Credit is extended, the immediacy goes away and demand will slacken again.  If the tax credit goes away, the demand will still slacken.  The difference is that our children and grandchildren won't be left with yet another bill from the government. 

But, what happens when the demand weakens and prices start to drop?  Gee... I don't know...  what happens when the store runs a sale and you can get that flat screen you've been looking at for the last 3 months?  If you have a little money saved up, you go buy it.  That is the market working. 

Prices will drop, and people will buy properties that seem like good deals to them.  A few buyers in the market will see properties that they have been eying getting snapped up before they respond... and the market will start its recovery. 

The Home Buyer Tax Credit is a stalling tactic...

That's all.  It doesn't create recovery, it spurs demand from the people that were on the fence... but we need a constant stream of people coming OVER the fence.  The ONLY way to do that is to make people comfortable with their jobs and with the family finances.  The economy needs to begin recovery for that.  Adding more deficit spending isn't going to do that...  That actually hurts, because it places a restriction on credit availability... subject for a different blog post...

The bottom line is that housing has to recovery naturally.  Yes, real estate agents have been helped by the program, but it is our kids that will get the bill for that help.  We need to call a stop to this before it gets more out of hand.

I was talking with a client last night... a first time home buyer.  He wants to take advantage of the First Time Home Buyer Tax Credit (FTHBTC).  As we were looking through the results, one thing became VERY clear... 

In the price range, foreclosures and short sales dominate the market.  Of 40 listings, there were about 6 that weren't short sales or foreclosures.  Of those 34, about 22 of them were short sales.  And he doesn't want to get involved in a process that could end up with him missing the First Time Home Buyer Tax Credit by a few days because the bank just doesn't care about a schedule. 

So, all of those properties were cut in the first round... 

This brings up two points... 

• It you are a First Time Home Buyer, and you are interested in getting the $8000 Tax Credit, time is ticking to get on with finding the property you want to buy.  The end of November seems like it is a long way off, but the average short sale takes about 4 months to complete...  Even "regular" sales can take 60 days in the current climate. 
  
• Banks are shooting themselves in the foot by taking an unreasonable time to bring a transaction to close.  They want to impose timelines on buyers, but want none imposed on them.  There is just NO reason for the process to take as long as many of them take... and the proof exists in a couple of banks that can apparently turn them around in a much shorter timeframe. 
  

But... a bunch of bad apples are spoiling it for the few that aren't. 

So, if you are a First Time Home Buyer in Lilburn GA, or the surrounding area, and you are looking forward to the Tax Credit, it is time to give me a call.

It has been pretty well publicized, but I thought I would toss it out there again...  There is an $8,000 tax credit available for 'first time home buyers.'  Here are a few facts about the program...

• A First Time Home Buyer is defined as someone that hasn't owned a home in the last three years.
• The Credit is good for 10% of the purchase price of a home (new or resale) up to $8,000.
• There is a phase out for people with a Modified Adjusted Gross Income of more that $75,000.
• There are several ways to recapture the tax credit NOW, even if you have already filed your 2008 taxes.
• It is good on purchases up until December 1st, 2009.

There is a lot of pretty easy to digest information available direct from the source, the IRS, available here.

If you qualify, this is a GREAT incentive to buy a home.  Rates are 'kick-butt' low, inventories are strong... although I will be writing about that in the next day or two...  and underwriting guidelines are tougher than a few years ago, but not impossible.

from LaneBailey.com