First Time Home Buyer » tax credit

Better off without the Tax Credit?

chipallen — Tue, 31 Aug 2010 14:00:49 +0000

Yes, you might be better off buying now than when the tax credit was in effect. The reasons are very simple. A historic drop in interest rates and less competition if you are buying residential property under $400,000. If you were taking out your mortgage today, your interest rate would probably be around 4.5% for a thirty year fixed rate mortgage. Rates in April were right around 5.25%. You would be spending $135 less on your monthly payment, for an annual savings of $1,620 per year.

Home sales hit a wall with the expiration of the tax credit, reminiscent of how “Cash for Clunkers” sucked up a lot of future demand for car sales. One advantage of the current market situation is that lower interest rates and housing prices are available to everyone purchasing residential real estate, whether homeowners or investors. I have noticed an increase in savvy investors buying real estate to “fix and hold”. They are saying the drop in demand after April has enabled them to get lower offers accepted.

Do I wish a tax credit would come back for everyone, not just first time homebuyers? Of course I do. Do I think it will with our record deficits? Not likely. If you purchased back in April, congratulations. You are making yourself rich instead of a landlord. Hopefully you went with a zero or low cost loan. If so it might make sense to refinance now, saving a lot of money. As always, have your mortgage professional do the numbers.

Remember that unless you are Warren Buffet, you can not time the market. I have missed a lot of great deals because I thought prices were going to go a little lower. Feel free to call or email with any questions.

Next Week: Update on FHA negative equity refinance program

Best

Chip

Chip Allen

Crestline Mortgage Bankers

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Can We Keep It Going?

admin — Mon, 02 Aug 2010 14:00:05 +0000

No doubt about it, it’s been a good summer. It can’t even come close to comparing to last summer when I wondered if we would ever sell a home again. The first signs of good things came from my assistant Linda at Fuller Sotheby’s in March. Linda handles administrative services for several brokers in our office and one day back in March, she looked particularly busy. I asked her how her day was going and she replied that the office is in mid-summer form. I asked her what she meant. She said she’s normally only this busy with homes under contract in mid-summer, but here it was mid-March and she had more transactions than she could handle. I knew then that we were in store for a good summer and now, looking back, we were right.

What changed? Well it’s certainly hasn’t been because there are more jobs, but I can point to a few things that helped:

1) The tax credit finishing up at the end of April brought in a frenzy of business at the 11^th hour. It was crazy for a few weeks at the end of the April. Since Uncle Sam was not extending the credit, more people realized the urgency to buy now.

2) While unemployment is not reversing itself for the moment, I do think it has stabilized, marked by a few good months of positive job growth. This instilled some confidence in people to start spending money again. Jobs are the one area that can turn the entire economy around and prevent a double dip recession. Many large corporations are flushed with cash so the question now is, will they hire employees and expand or will they pay it out to shareholders?

3) Pent up demand! It’s a term we have used a lot over the last 18 months, talking about the need and demand by people to buy new homes. I have said all along in this column that as realtors, we could feel the pent up demand to buy homes; we just did not know when it would shake loose. It started this summer.

4) Finally, while new construction is not booming around the country it is doing ok here in Colorado. I know many builders that have started new projects, created new price points, new marketing strategies, and new alliances and as a result are doing pretty well. It’s far off from where we used to be but its start.

The only question that remains is, “Can we keep it going?” I hear the analysts talking every day about the chances of a double dip recession. I don’t have a crystal ball to know one way or another if that will happen. I do know this market is fragile to say the least and we can all hope for the best.

Dan Polimino is a Realtor with Fuller Sotheby’s International Realty. He can be reached at DPolimino@fullerproperties.com and www.coloradodreamhouse.com/denverpost

Click here to Get started searching for YOUR Colorado Dream Home.

Why the ending of the Federal Home Buyer Tax Credit is a good thing………

admin — Tue, 06 Apr 2010 14:00:36 +0000

As most of you know, the end of the tax credit is just a few short weeks away on April 30, 2010. Under the guidelines, you have to be “under contract” by April 30, and then close the transaction by June 30, 2010 in order to receive the either $8000 First Time Buyer credit or the $6500 Move Up Buyer credit. The tax credit was extended back in November of 2009 at a time when home values and prices were continuing to fall and our government was trying to help solve that problem. I believe we did the best we could at the time.

For personal reasons as a loan originator (and my own checkbook) it would be great to have the tax credit extended and extended again. However when we “over incent” people to do things it will ultimately come back to bite us. By having extra incentives like the tax credit, our federal government is incurring tremendous debt in order to accomplish this. The national debt will ultimately have to be repaid by us as tax payers through higher federal income taxes which will in turn slow our economic recovery because we have less money to spend. In addition, when the tax credit is gone there is a risk that demand for homes will fall off significantly and we will see property values reduce in value again. A concept known as the “double dip”. So despite our government’s efforts to ease the drop in property values, ultimately the markets will determine if they succeeded or not.

The tax credit was good but it is time for us to stand on our own feet. There are enough incentives already for being a homeowner through the interest and points tax deduction, property tax deduction, and the potential for your property to appreciate in value. The tax credit although needed at the time needs to end.