Brought to you by the National Association of Home Builders
Frequently Asked Questions
About the First-Time Home Buyer Tax Credit
The Worker, Homeownership, and Business Assistance Act of 2009 has extended the tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence. The tax credit now applies to sales occurring on or after January 1, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 will qualify.
For sales occurring after November 6, 2009, the Act establishes income limits of $125,000 for single taxpayers and $225,000 for married couples filing joint returns.
The income limits for sales occurring on or after January 1, 2009 and on or before November 6, 2009, are $75,000 for single taxpayers and $150,000 for married taxpayers filing joint returns.
The following questions and answers provide basic information about the tax credit. If you have more specific questions, we strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation.
1.Who is eligible to claim the $8,000 tax credit?
First-time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and on or before April 30, 2010. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner. A limited exception exists for certain contract for deed purchases and installment sale purchases. See the IRS website for more detail.
However, the law also allows home sales occurring by June 30, 2010 to qualify, provided they are due to a binding sales contract in force on or before April 30, 2010.
Persons who are claimed as dependents by other taxpayers or who are under age 18 are not qualified for the tax credit program.
2.What is the definition of a first-time home buyer?
The law defines “first-time home buyer” as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.
For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. However, IRS Notice 2009-12 allows unmarried joint purchasers to allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.
3.How is the amount of the tax credit determined?
The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
4.Are there any income limits for claiming the tax credit?
Yes. For sales occuring after November 6, 2009, the income limit for single taxpayers is $125,000; the limit is $225,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $125,000 for single taxpayers and $225,000 for married taxpayers filing a joint return. The phaseout range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $145,000 (single) or $245,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.
5.The income limits for claiming the tax credit were raised when the tax credit was extended. Are the higher limits retroactive?
No. The new income limits are only applicable to purchases occurring after November 6, 2009.
The income limits for sales occuring on or after January 1, 2009 and on or before November 6, 2009 are $75,000 for single taxpayers and $150,000 for married couples filing jointly.
6.What is “modified adjusted gross income”?
Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine “adjusted gross income” or AGI. AGI is total income for a year minus certain deductions (known as “adjustments” or “above-the-line deductions”), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.
To determine modified adjusted gross income (MAGI), add to AGI certain amounts of foreign-earned income. See IRS Form 5405 for more details.
7.If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
Possibly. It depends on your income. Partial credits of less than $8,000 are available for some taxpayers whose MAGI exceeds the phaseout limits.
8.Can you give me an example of how the partial tax credit is determined?
Just as an example, assume that a married couple has a modified adjusted gross income of $235,000. The applicable phaseout to qualify for the tax credit is $225,000, and the couple is $10,000 over this amount. Dividing $10,000 by the phaseout range of $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.
Here’s another example: assume that an individual home buyer has a modified adjusted gross income of $138,000. The buyer’s income exceeds $125,000 by $13,000. Dividing $13,000 by the phaseout range of $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.
Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.
9.How is this home buyer tax credit different from the tax credit that Congress enacted in early 2009?
The tax credit’s income limits were increased, the documentation requirements were tightened, and the program's deadlines were extended.
10.How do I claim the tax credit? Do I need to complete a form or application? Are there documentation requirements?
You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on line 67 of the 1040 income tax form for 2009 returns (line 69 of the 1040 income tax form for 2008 returns). No other applications are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and first-time home buyer tests. Note that you cannot claim the credit on Form 5405 for an intended purchase for some future date; it must be a completed purchase. Home buyers must attach a copy of their HUD-1 settlement form (closing statement) to Form 5405 as proof of the completed home purchase.
11.What types of homes will qualify for the tax credit?
Any home that will be used as a principal residence will qualify for the credit, provided the home is purchased for a price less than or equal to $800,000. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences.
It is important to note that you cannot purchase a home from, among other family members, your ancestors (parents, grandparents, etc.), your lineal descendants (children, grandchildren, etc.) or your spouse or your spouse’s family members. Please consult with your tax advisor for more information. Also see IRS Form 5405.
12.I read that the tax credit is “refundable.” What does that mean?
The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.
For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed).
13.Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been “purchased” on the date the owner first occupies the house. In this situation, the date of first occupancy must be on or after January 1, 2009 and on or before April 30, 2010 (or by June 30, 2010, provided a binding sales contract was in force by April, 30, 2010).
In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.
14.Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
Yes. The tax credit can be combined with an MRB home buyer program. Note that first-time home buyers who purchased a home in 2008 may not claim the tax credit if they are participating in an MRB program.
15.I live in the District of Columbia. Can I claim both the Washington, D.C. first-time home buyer credit and this new credit?
No. You can claim only one.
16.I am not a U.S. citizen. Can I claim the tax credit?
Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of “nonresident alien” in IRS Publication 519.
17.Is a tax credit the same as a tax deduction?
No. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $8,000 in income taxes and who receives an $8,000 tax credit would owe nothing to the IRS.
A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $8,000 in income taxes. If the taxpayer receives an $8,000 deduction, the taxpayer’s tax liability would be reduced by $1,200 (15 percent of $8,000), or lowered from $8,000 to $6,800.
18.I bought a home in 2008. Do I qualify for this credit?
No, but if you purchased your first home between April 9, 2008 and January 1, 2009, you may qualify for a different tax credit. Please consult with your tax advisor for more information.
19.Is there a way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 or 2010 tax return?
Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the downpayment.
Buyers should adjust their withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.
In addition, rule changes made as part of the economic stimulus legislation allow home buyers to claim the tax credit and participate in a program financed by tax-exempt bonds. As a result, some state housing finance agencies have introduced programs that provide short-term second mortgage loans that may be used to fund a downpayment. Prospective home buyers should check with their state housing finance agency to see if such a program is available in their community. To date, 18 state agencies have announced tax credit assistance programs, and more are expected to follow suit. The National Council of State Housing Agencies (NCSHA) has compiled a list of such programs, which can be found here.
20.HUD is now allowing "monetization" of the tax credit. What does that mean?
It means that HUD allows buyers using FHA-insured mortgages to apply their anticipated tax credit toward their home purchase immediately rather than waiting until they file their 2009 or 2010 income taxes to receive a refund. These funds may be used for certain downpayment and closing cost expenses.
Under HUD’s guidelines, non-profits and FHA-approved lenders are allowed to give home buyers short-term loans of up to $8,000. The guidelines also allow government agencies, such as state housing finance agencies, to facilitate home sales by providing longer term loans secured by second mortgages.
Housing finance agencies and other government entities may also issue tax credit loans, which home buyers may use to satisfy the FHA 3.5 percent downpayment requirement. In addition, approved FHA lenders can purchase a home buyer’s anticipated tax credit to pay closing costs and downpayment costs above the 3.5 percent downpayment that is required for FHA-insured homes.
More information about the guidelines is available on the NAHB web site. Read the HUD mortgagee letter (pdf) and an explanation of the FHA Mortgagee Letter on Tax Credit Monetization (pdf). An FAQ about monetization (pdf) is available at the NAHB web site.
21.If I’m qualified for the tax credit and buy a home in 2009 (or 2010), can I apply the tax credit against my 2008 (or 2009) tax return?
Yes. The law allows taxpayers to choose (“elect”) to treat qualified home purchases in 2009 (or 2010) as if the purchase occurred on December 31, 2008 (or if in 2010, December 31, 2009). This means that the previous year’s income limit (MAGI) applies and the election accelerates when the credit can be claimed. A benefit of this election is that a home buyer in 2009 or 2010 will know their prior year MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.
Taxpayers buying a home who wish to claim it on their prior year tax return, but who have already submitted their tax return to the IRS, may file an amended return claiming the tax credit using Form 1040X. You should consult with a tax professional to determine how to arrange this.
22.For a home purchase in 2009 or 2010, can I choose whether to treat the purchase as occurring in the prior or present year, depending on in which year my credit amount is the largest?
Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in the present year and a larger credit would be available using the prior year MAGI amounts, then you can choose the year that yields the largest credit amount.
Thursday, December 10, 2009
Monday, November 23, 2009
U.S. Home Sales Rise 10% In October
By Shobhana Chandra
Nov. 23 (Bloomberg) -- Sales of existing U.S. homes increased more than forecast in October to the highest level since February 2007, spurred in part by a tax credit that lured first-time buyers.
Purchases rose 10.1 percent to a 6.1 million annual rate from a 5.54 million pace in September, the National Association of Realtors said today in Washington. The median sales price decreased 7.1 percent from October 2008, the smallest decline in more than a year.
Cheaper homes and stimulus such as the $8,000 incentive, extended and expanded by the Obama administration this month, have revived an ailing housing market that contributed to the worst economic slump since the Great Depression. Further improvement that would aid the economy’s recovery depends on an easing in unemployment and foreclosures.
“It’s an impressive increase and shows a lot of pent-up demand for housing,” said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York. “Buyers have enough confidence to take the plunge. The housing market recovery will be a durable one.”
Existing home sales were forecast to rise to a 5.7 million annual rate, according to the median forecast of 66 economists in a Bloomberg News survey. Estimates ranged from 5.2 million to 6 million, after an initially reported 5.57 million rate in September.
U.S. stocks extended gains after the report. The Standard & Poor’s 500 Index rose 1.9 percent to 1,111.52 at 10:18 a.m. in New York.
Year Earlier
Sales had reached a 4.49 million pace in January, their lowest level since comparable records began in 1999.
Purchases of existing homes rose 23.5 percent in October compared with a year earlier. The median price fell 7.1 percent from a year ago to $173,100.
The number of previously-owned unsold homes on the market fell 3.7 percent to 3.57 million. At the current sales pace, it would take 7 months to sell those houses compared with 8 months at the end of the prior month. The months’ supply is the lowest since February 2007.
The share of homes sold as foreclosures or otherwise distressed properties rose to 30 percent from 29 percent in September, NAR chief economist Lawrence Yun said in a press conference today.
A “similarly robust” sales gain may occur this month, he said.
“With such a sales spike, a measurable decline should be anticipated in December and early next year before another surge in spring and early summer,” Yun said.
Single-Family Gains
The report showed sales of existing single-family homes rose 9.7 percent, the biggest gain since 1983, to an annual rate of 5.33 million. Sales of condos and co-ops increased 13.2 percent to a 770,000 rate.
Purchases rose 11.6 percent in the Northeast, 14.4 percent in the Midwest, 12.7 percent in the South and 1.6 percent in the West.
Sales of previously owned homes, which make up more than 90 percent of the market, are compiled from contract closings and may reflect purchases agreed upon weeks or months earlier. Many economists consider new-home sales, recorded when a contract is signed, a more timely barometer.
The Commerce Department may report on Nov. 25 that new home sales rebounded to a 405,000 annual percent in October, according to the Bloomberg survey.
Tax Credit
Home construction seized up last month as builders waited to find out if the first-time homebuyer tax credit would end, a Commerce Department report showed last week. Builders in October broke ground on the fewest houses since April’s record low annual pace.
Sales and construction may get another boost after President Barack Obama on Nov. 6 extended the incentive until April 30. Earlier, buyers had to close the transaction by Nov. 30 to be eligible. The government also expanded the program to include some current owners.
Borrowing costs may remain low as the Federal Reserve has signaled it’ll keep the benchmark interest rate near zero for an extended period. The average rate on a 30-year fixed mortgage fell last week to 4.83 percent, the lowest since May, according to Freddie Mac.
While low rates and government aid are making it easier to buy a home, the labor market remains a risk. The unemployment rate, which rose to a 26-year high of 10.2 percent last month, will stay above 10 percent through the first half of 2010, a Bloomberg survey showed.
Foreclosure Filings
Foreclosure filings surpassed 300,000 for an eighth straight month in October as rising joblessness made it tougher for homeowners to pay bills, according to RealtyTrac Inc. data.
Some companies see a potential for stronger demand. Hovnanian Enterprises Inc., New Jersey’s largest homebuilder, has signed contracts or options to buy 4,000 land lots in preparation for a market recovery, said Chief Executive Officer Ara K. Hovnanian. The Red Bank, New Jersey-based builder had reduced its land holdings during the recession.
“Prices are ridiculously low in some markets,” he said at a conference in New York on Nov. 17. “That’s not going to stay.”
To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net
Nov. 23 (Bloomberg) -- Sales of existing U.S. homes increased more than forecast in October to the highest level since February 2007, spurred in part by a tax credit that lured first-time buyers.
Purchases rose 10.1 percent to a 6.1 million annual rate from a 5.54 million pace in September, the National Association of Realtors said today in Washington. The median sales price decreased 7.1 percent from October 2008, the smallest decline in more than a year.
Cheaper homes and stimulus such as the $8,000 incentive, extended and expanded by the Obama administration this month, have revived an ailing housing market that contributed to the worst economic slump since the Great Depression. Further improvement that would aid the economy’s recovery depends on an easing in unemployment and foreclosures.
“It’s an impressive increase and shows a lot of pent-up demand for housing,” said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York. “Buyers have enough confidence to take the plunge. The housing market recovery will be a durable one.”
Existing home sales were forecast to rise to a 5.7 million annual rate, according to the median forecast of 66 economists in a Bloomberg News survey. Estimates ranged from 5.2 million to 6 million, after an initially reported 5.57 million rate in September.
U.S. stocks extended gains after the report. The Standard & Poor’s 500 Index rose 1.9 percent to 1,111.52 at 10:18 a.m. in New York.
Year Earlier
Sales had reached a 4.49 million pace in January, their lowest level since comparable records began in 1999.
Purchases of existing homes rose 23.5 percent in October compared with a year earlier. The median price fell 7.1 percent from a year ago to $173,100.
The number of previously-owned unsold homes on the market fell 3.7 percent to 3.57 million. At the current sales pace, it would take 7 months to sell those houses compared with 8 months at the end of the prior month. The months’ supply is the lowest since February 2007.
The share of homes sold as foreclosures or otherwise distressed properties rose to 30 percent from 29 percent in September, NAR chief economist Lawrence Yun said in a press conference today.
A “similarly robust” sales gain may occur this month, he said.
“With such a sales spike, a measurable decline should be anticipated in December and early next year before another surge in spring and early summer,” Yun said.
Single-Family Gains
The report showed sales of existing single-family homes rose 9.7 percent, the biggest gain since 1983, to an annual rate of 5.33 million. Sales of condos and co-ops increased 13.2 percent to a 770,000 rate.
Purchases rose 11.6 percent in the Northeast, 14.4 percent in the Midwest, 12.7 percent in the South and 1.6 percent in the West.
Sales of previously owned homes, which make up more than 90 percent of the market, are compiled from contract closings and may reflect purchases agreed upon weeks or months earlier. Many economists consider new-home sales, recorded when a contract is signed, a more timely barometer.
The Commerce Department may report on Nov. 25 that new home sales rebounded to a 405,000 annual percent in October, according to the Bloomberg survey.
Tax Credit
Home construction seized up last month as builders waited to find out if the first-time homebuyer tax credit would end, a Commerce Department report showed last week. Builders in October broke ground on the fewest houses since April’s record low annual pace.
Sales and construction may get another boost after President Barack Obama on Nov. 6 extended the incentive until April 30. Earlier, buyers had to close the transaction by Nov. 30 to be eligible. The government also expanded the program to include some current owners.
Borrowing costs may remain low as the Federal Reserve has signaled it’ll keep the benchmark interest rate near zero for an extended period. The average rate on a 30-year fixed mortgage fell last week to 4.83 percent, the lowest since May, according to Freddie Mac.
While low rates and government aid are making it easier to buy a home, the labor market remains a risk. The unemployment rate, which rose to a 26-year high of 10.2 percent last month, will stay above 10 percent through the first half of 2010, a Bloomberg survey showed.
Foreclosure Filings
Foreclosure filings surpassed 300,000 for an eighth straight month in October as rising joblessness made it tougher for homeowners to pay bills, according to RealtyTrac Inc. data.
Some companies see a potential for stronger demand. Hovnanian Enterprises Inc., New Jersey’s largest homebuilder, has signed contracts or options to buy 4,000 land lots in preparation for a market recovery, said Chief Executive Officer Ara K. Hovnanian. The Red Bank, New Jersey-based builder had reduced its land holdings during the recession.
“Prices are ridiculously low in some markets,” he said at a conference in New York on Nov. 17. “That’s not going to stay.”
To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net
Tuesday, November 17, 2009
Home Buyer Tax Credit: 10 Things To Know
The Tax Guy by Bill Bischoff (Author Archive)
On Nov. 6, the president signed the new Worker, Homeownership, and Business Assistance Act of 2009 into law. The centerpiece of this legislation is the extension and liberalization of what is now inaccurately called the first-time home buyer credit.
Here are the 10 most important things to know about the revamped credit.
1. New purchase deadline extends into 2010
The home buyer credit was previously scheduled to expire on Nov. 30, 2009. The new law extends the deal to cover purchases of U.S. principal residences that close by April 30, 2010. However, if a home is under contract on that date, the deadline for closing is extended to June 30, 2010.
2. Existing homeowners can now qualify
The new law allows a reduced credit for existing homeowners who buy a replacement U.S. principal residence after Nov. 6, 2009. The credit equals the lesser of: (1) $6,500, or (2) 10% of the price of the replacement home, or (3) $3,250 for a buyer who uses married filing separate status. The new existing-homeowner credit is only available for purchases that close after Nov. 6, 2009. To qualify, the buyer must have owned and used the same home as a principal residence for at least five consecutive years during the eight-year period ending on the purchase date for the replacement principal residence. If you’re married, your spouse must pass this test too (whether or not you file jointly).
3. Larger credits still allowed for first-time buyers
Before the new law, the home buyer credit was only available to so-called first-time buyers, which means someone who had not owned a U.S. principal residence during the three-year period ending on the purchase date for a home that will serve as the buyer’s new principal residence. If you’re married, both you and your spouse must pass the three-year test (whether or not you file jointly). These first-time home buyer rules still apply for purposes of claiming a larger credit of up to $8,000. Specifically, the credit for a first-time buyer still equals the lesser of: (1) $8,000, or (2) 10% of the home purchase price, or (3) $4,000 if you use married filing separate status.
4. Higher-income folks can now qualify
The home buyer credit is phased out (reduced or completely eliminated) as income goes up. However, the new law significantly raises the phase-out ranges so that many more higher-income buyers will now qualify.
* For purchases after Nov. 6, 2009, the phase-out range for unmarried individuals and married folks who file separately is between modified adjusted gross income (MAGI) of $125,000 and $145,000 (way up from the old-law range of $75,000-$95,000).
* The phase-out range for married joint filers is now between MAGI of $225,000 and $245,000 (way up from the previous range of $150,000-$170,000).
5. New $800,000 purchase price limit
For purchases after Nov. 6, 2009, the credit can only be claimed for a principal residence that costs $800,000 or less. So if your new home costs $800,001, the credit is completely off limits (but I doubt too many people will feel sorry for you).
6. No more credits for kids or dependents
For purchases after Nov. 6, 2009, the home buyer must be at least 18 years old on the purchase date to qualify for the credit. Also, no credit is allowed for a buyer who can be claimed as a dependent on someone else’s Form 1040 for the year of the purchase. These new rules are intended to shut down the practice of claiming the credit for youngish buyers who really don’t even have incomes of their own (like college students who use money from their parents to buy a pad near campus).
7. New anti-fraud rules
A recent government report said the IRS has already identified over 100,000 returns with potentially fraudulent home buyer credits. This is hardly surprising when the government is willing to give away up to $8,000 in free money to anyone who files a return, even when that person reports no income. Believe it or not, absolutely no documentation was required to claim the credit, until now. For credits claimed on 2009 and 2010 returns, buyers must attach a properly executed real estate settlement sheet to the return. Also, the IRS can now simply disallow credits in fishy circumstances (like when it appears the $8,000 credit is being claimed by someone who already owns a home).
8. Credits can still be claimed on prior-year returns
Under the revamped rules, you can still claim the credit for a 2009 purchase on your 2008 return (although you would now generally have to file an amended return to do so). You can also claim the credit for a 2010 purchase on your 2009 Form 1040. This allows you to cash in on the credit sooner rather than later, and it may also allow you to claim a larger credit if your income in the year of purchase is higher than in the preceding year.
9. Credits must still be repaid in some cases
Under old-law rules for homes purchased between April 9, 2008 and Dec. 31, 2008, buyers are generally required to repay the credit over 15 years. However, this repayment rule is generally eliminated for purchases after 2008. That said, you might still have to repay the credit if you sell your home within three years of the purchase date or stop using it as your principal residence during that period.
10. Special rules for military service members
For military service members on extended duty outside the U.S., the new law lengthens the deadline for closing on home purchases for an extra year, to April 30, 2011 (or June 30, 2011 for homes under contract on April 30, 2011). The new law also waives the credit repayment rules for service members who are forced to move due to receiving new orders. The same special rules apply to members of the foreign service and intelligence communities.
On Nov. 6, the president signed the new Worker, Homeownership, and Business Assistance Act of 2009 into law. The centerpiece of this legislation is the extension and liberalization of what is now inaccurately called the first-time home buyer credit.
Here are the 10 most important things to know about the revamped credit.
1. New purchase deadline extends into 2010
The home buyer credit was previously scheduled to expire on Nov. 30, 2009. The new law extends the deal to cover purchases of U.S. principal residences that close by April 30, 2010. However, if a home is under contract on that date, the deadline for closing is extended to June 30, 2010.
2. Existing homeowners can now qualify
The new law allows a reduced credit for existing homeowners who buy a replacement U.S. principal residence after Nov. 6, 2009. The credit equals the lesser of: (1) $6,500, or (2) 10% of the price of the replacement home, or (3) $3,250 for a buyer who uses married filing separate status. The new existing-homeowner credit is only available for purchases that close after Nov. 6, 2009. To qualify, the buyer must have owned and used the same home as a principal residence for at least five consecutive years during the eight-year period ending on the purchase date for the replacement principal residence. If you’re married, your spouse must pass this test too (whether or not you file jointly).
3. Larger credits still allowed for first-time buyers
Before the new law, the home buyer credit was only available to so-called first-time buyers, which means someone who had not owned a U.S. principal residence during the three-year period ending on the purchase date for a home that will serve as the buyer’s new principal residence. If you’re married, both you and your spouse must pass the three-year test (whether or not you file jointly). These first-time home buyer rules still apply for purposes of claiming a larger credit of up to $8,000. Specifically, the credit for a first-time buyer still equals the lesser of: (1) $8,000, or (2) 10% of the home purchase price, or (3) $4,000 if you use married filing separate status.
4. Higher-income folks can now qualify
The home buyer credit is phased out (reduced or completely eliminated) as income goes up. However, the new law significantly raises the phase-out ranges so that many more higher-income buyers will now qualify.
* For purchases after Nov. 6, 2009, the phase-out range for unmarried individuals and married folks who file separately is between modified adjusted gross income (MAGI) of $125,000 and $145,000 (way up from the old-law range of $75,000-$95,000).
* The phase-out range for married joint filers is now between MAGI of $225,000 and $245,000 (way up from the previous range of $150,000-$170,000).
5. New $800,000 purchase price limit
For purchases after Nov. 6, 2009, the credit can only be claimed for a principal residence that costs $800,000 or less. So if your new home costs $800,001, the credit is completely off limits (but I doubt too many people will feel sorry for you).
6. No more credits for kids or dependents
For purchases after Nov. 6, 2009, the home buyer must be at least 18 years old on the purchase date to qualify for the credit. Also, no credit is allowed for a buyer who can be claimed as a dependent on someone else’s Form 1040 for the year of the purchase. These new rules are intended to shut down the practice of claiming the credit for youngish buyers who really don’t even have incomes of their own (like college students who use money from their parents to buy a pad near campus).
7. New anti-fraud rules
A recent government report said the IRS has already identified over 100,000 returns with potentially fraudulent home buyer credits. This is hardly surprising when the government is willing to give away up to $8,000 in free money to anyone who files a return, even when that person reports no income. Believe it or not, absolutely no documentation was required to claim the credit, until now. For credits claimed on 2009 and 2010 returns, buyers must attach a properly executed real estate settlement sheet to the return. Also, the IRS can now simply disallow credits in fishy circumstances (like when it appears the $8,000 credit is being claimed by someone who already owns a home).
8. Credits can still be claimed on prior-year returns
Under the revamped rules, you can still claim the credit for a 2009 purchase on your 2008 return (although you would now generally have to file an amended return to do so). You can also claim the credit for a 2010 purchase on your 2009 Form 1040. This allows you to cash in on the credit sooner rather than later, and it may also allow you to claim a larger credit if your income in the year of purchase is higher than in the preceding year.
9. Credits must still be repaid in some cases
Under old-law rules for homes purchased between April 9, 2008 and Dec. 31, 2008, buyers are generally required to repay the credit over 15 years. However, this repayment rule is generally eliminated for purchases after 2008. That said, you might still have to repay the credit if you sell your home within three years of the purchase date or stop using it as your principal residence during that period.
10. Special rules for military service members
For military service members on extended duty outside the U.S., the new law lengthens the deadline for closing on home purchases for an extra year, to April 30, 2011 (or June 30, 2011 for homes under contract on April 30, 2011). The new law also waives the credit repayment rules for service members who are forced to move due to receiving new orders. The same special rules apply to members of the foreign service and intelligence communities.
Sunday, November 15, 2009
Boulder County Market Update
SOLD activity for the past two months (September & October) for Boulder County have mirrored the sales figures for the same two months in 2008. In 2009, there were 471 single family sales vs. 483 in 2008 during this time period & 197 attached unit sales in 2009 versus 186 in 2008. This is a good indicator that the Boulder County real estate market has plateaued.
After several years of experiencing a decline in sales activity, this may be the start of an upward swing in the area real estate market. The balance of the year will provide a clearer picture of what lies ahead.
Overall, the 2009 Boulder County market will be off approximately 18% in SOLD residential listings as compared to 2008. (This is a projection since November and December figures are not yet available.)
Assuming November and December/2009 SOLD listings are comparable to 2008 numbers, then 2010 promises to be comparable to 2008 in total SOLD residential listings. This would have a positive impact on the market as a whole as home purchasers would begin to buy with a renewed sense of confidence. Hopefully, new home builders would follow suit and once again the sound of hammers pounding and BOOM boxes booming would be heard across the county.
After several years of experiencing a decline in sales activity, this may be the start of an upward swing in the area real estate market. The balance of the year will provide a clearer picture of what lies ahead.
Overall, the 2009 Boulder County market will be off approximately 18% in SOLD residential listings as compared to 2008. (This is a projection since November and December figures are not yet available.)
Assuming November and December/2009 SOLD listings are comparable to 2008 numbers, then 2010 promises to be comparable to 2008 in total SOLD residential listings. This would have a positive impact on the market as a whole as home purchasers would begin to buy with a renewed sense of confidence. Hopefully, new home builders would follow suit and once again the sound of hammers pounding and BOOM boxes booming would be heard across the county.
ConocoPhillips Timeline
Company outlines its proposals to Louisville city officials
By Alicia Wallace Camera Business Writer
Posted: 11/13/2009 07:21:02 PM MST
ConocoPhillips expects to open 1.6 million square feet of facilities -- more than half of its new campus -- in Louisville by 2013, Louisville City Manager Malcolm Fleming said Friday night in a memo to city officials.
The Houston-based energy giant this week submitted its development proposal to city staff for its planned global training facility and new energy research and development center that could eventually employ 7,000 people at the former StorageTek campus off U.S. 36. It marks the first time ConocoPhillips has revealed a construction timeline and specifics on the size of its facilities.
The 6-inch-thick packet of documents submitted to the city was not available for public viewing on Friday as planning staff spent the day poring through its contents.
In the memo, Fleming said the campus will consist of 2.5 million square feet of facilities and be constructed in three phases: the opening of 1.6 million square feet by 2013, another 150,000 square feet by 2018 and the final 750,000 square feet by 2032.
The initial phase will include: 472,647 square feet of office space, a 502,617-square-foot research center, a 34,967-square-foot learning center and a 120-room hotel.
The development is expected to take up 120 acres of the 432-acre site, according to the memo. Last month, Mary Manning, ConocoPhillips' general manager for corporate real estate, told the Louisville City Council that the company intended to build a "quiet and astonishing" campus that would be compact and occupy less than half of the site.
According to the memo, the undeveloped portions of the site will become "restored prairie," "enhanced prairie" or "prairie garden."
Fleming added in the memo that ConocoPhillips' traffic impact study projected the development will generate 10,500 trips per day.
ConocoPhillips' submitted plan did not include a projected number of employees, Fleming said in an interview with the Camera on Friday. ConocoPhillips officials have said that around 7,000 employees could be working on the site in a 25-to-30-year time frame.
City and business leaders in Broomfield and Louisville are eagerly awaiting the influx of jobs and sales tax revenue.
"The impact is going to be huge," said Broomfield Mayor Patrick Quinn. "Plus, they're the type of jobs you want. Those additional people will be out buying goods at grocery stores and other shops so the economic impact will be definitely significant and positive."
The Blue Parrot, one of Louisville's oldest downtown restaurants, also expects a boost to its bottom line.
"Folks who are coming and going will need a place to eat, and we hope they'll come downtown," said Paul Weissmann, a Blue Parrot manager for 21 years who is also the state's House majority leader. "When StorageTek was it in its heyday, it helped our restaurant. What ConocoPhillips is going to be doing with the training facility will likely help even more."
During the past year, ConocoPhillips officials have shown conceptual plans to the city and have worked closely with area officials on the company's new campus, Fleming said. The development proposal contained a lot of information, he said, adding that "so far, we haven't seen anything that is a surprise."
The next step for the city will include distributing the proposal to all departments for comment. The city also will take some actions of its own, including looking at impacts to traffic and utilities and creating development guidelines.
Within the next 12 to 13 months, the proposal is expected to make its way to the planning commission and eventually to Louisville's city council.
Camera intern James Collector contributed to this report.
By Alicia Wallace Camera Business Writer
Posted: 11/13/2009 07:21:02 PM MST
ConocoPhillips expects to open 1.6 million square feet of facilities -- more than half of its new campus -- in Louisville by 2013, Louisville City Manager Malcolm Fleming said Friday night in a memo to city officials.
The Houston-based energy giant this week submitted its development proposal to city staff for its planned global training facility and new energy research and development center that could eventually employ 7,000 people at the former StorageTek campus off U.S. 36. It marks the first time ConocoPhillips has revealed a construction timeline and specifics on the size of its facilities.
The 6-inch-thick packet of documents submitted to the city was not available for public viewing on Friday as planning staff spent the day poring through its contents.
In the memo, Fleming said the campus will consist of 2.5 million square feet of facilities and be constructed in three phases: the opening of 1.6 million square feet by 2013, another 150,000 square feet by 2018 and the final 750,000 square feet by 2032.
The initial phase will include: 472,647 square feet of office space, a 502,617-square-foot research center, a 34,967-square-foot learning center and a 120-room hotel.
The development is expected to take up 120 acres of the 432-acre site, according to the memo. Last month, Mary Manning, ConocoPhillips' general manager for corporate real estate, told the Louisville City Council that the company intended to build a "quiet and astonishing" campus that would be compact and occupy less than half of the site.
According to the memo, the undeveloped portions of the site will become "restored prairie," "enhanced prairie" or "prairie garden."
Fleming added in the memo that ConocoPhillips' traffic impact study projected the development will generate 10,500 trips per day.
ConocoPhillips' submitted plan did not include a projected number of employees, Fleming said in an interview with the Camera on Friday. ConocoPhillips officials have said that around 7,000 employees could be working on the site in a 25-to-30-year time frame.
City and business leaders in Broomfield and Louisville are eagerly awaiting the influx of jobs and sales tax revenue.
"The impact is going to be huge," said Broomfield Mayor Patrick Quinn. "Plus, they're the type of jobs you want. Those additional people will be out buying goods at grocery stores and other shops so the economic impact will be definitely significant and positive."
The Blue Parrot, one of Louisville's oldest downtown restaurants, also expects a boost to its bottom line.
"Folks who are coming and going will need a place to eat, and we hope they'll come downtown," said Paul Weissmann, a Blue Parrot manager for 21 years who is also the state's House majority leader. "When StorageTek was it in its heyday, it helped our restaurant. What ConocoPhillips is going to be doing with the training facility will likely help even more."
During the past year, ConocoPhillips officials have shown conceptual plans to the city and have worked closely with area officials on the company's new campus, Fleming said. The development proposal contained a lot of information, he said, adding that "so far, we haven't seen anything that is a surprise."
The next step for the city will include distributing the proposal to all departments for comment. The city also will take some actions of its own, including looking at impacts to traffic and utilities and creating development guidelines.
Within the next 12 to 13 months, the proposal is expected to make its way to the planning commission and eventually to Louisville's city council.
Camera intern James Collector contributed to this report.
Friday, November 13, 2009
2010 Sales Projections - National Association of Realtors
Daily Real Estate News | November 13, 2009
Yun: 2010 Sales to Rise 15 Percent
Home sales will increase 15 percent to about 5.7 million units and REALTOR® income will be up 20 percent in 2010, NAR Chief Economist Lawrence Yun told a packed room of REALTORS® today in a residential economic update at the 2009 NAR Conference & Expo.
Yun credited the home buyer tax credit with unleashing sales on the lower-end of the housing market this year, bringing up to 400,000 first-time buyers into the market who wouldn't have bought otherwise. That influx tightened inventories of starter homes, shored up prices, and helped reduce households' fear over continuing price drops.
This virtuous cycle will continue now that the federal government has extended the credit to mid-2010 and expanded it to make a smaller credit available to repeat buyers and to households with higher incomes. “The key is stabilizing prices and preserving household wealth,” he says.
Yun predicts the supply of homes to stabilize at the historic norm of six to seven months. Homes above $500,000 will remain elevated in the near-term, but that weakness will be offset by a hefty drop in starter-home inventories, which are running at about a five months supply.
The tightening inventory at all price points will help improve market performance by bringing supply into better balance with demand, but the added sales, particularly on the higher end, will also increase the number and quality of the market comparables used by appraisers to assign valuations. Once appraisals improve, foreclosures will ease, blunting their drag on the market and making it less likely that Fannie Mae, Freddie Mac, and even FHA will need help from the taxpayer.
“Then we’ll be set for a durable economic expansion,” he said.
New-home sales, which comprise about 10 percent of the market, will continue at suppressed levels--about 550,000 units, down from more than a million during the boom--mainly because builders have scaled projects way back, in part because financing isn't available.
"Weakness in new-home sales shouldn’t be viewed as tepid demand," he said.
Even under the most positive economic scenario, unemployment will remain elevated through 2010. Yun is predicting unemployment to stay near double-digits going into 2011, qualifying this recession, as some economists have, as the "Great Recession.”
For the longer term, the huge deficit run up by the federal government to shore up the economy remains the big question mark. Although the deficit is expected to improve each of the next three years, it will remain at historic highs. Unless the federal government releases a credible plan for shrinking it, investors will start to balk and interest rates will need to rise to bring them back. Should inflation be the result, the housing recovery will be set back.
Source: Robert Freedman, REALTOR® magazine
Yun: 2010 Sales to Rise 15 Percent
Home sales will increase 15 percent to about 5.7 million units and REALTOR® income will be up 20 percent in 2010, NAR Chief Economist Lawrence Yun told a packed room of REALTORS® today in a residential economic update at the 2009 NAR Conference & Expo.
Yun credited the home buyer tax credit with unleashing sales on the lower-end of the housing market this year, bringing up to 400,000 first-time buyers into the market who wouldn't have bought otherwise. That influx tightened inventories of starter homes, shored up prices, and helped reduce households' fear over continuing price drops.
This virtuous cycle will continue now that the federal government has extended the credit to mid-2010 and expanded it to make a smaller credit available to repeat buyers and to households with higher incomes. “The key is stabilizing prices and preserving household wealth,” he says.
Yun predicts the supply of homes to stabilize at the historic norm of six to seven months. Homes above $500,000 will remain elevated in the near-term, but that weakness will be offset by a hefty drop in starter-home inventories, which are running at about a five months supply.
The tightening inventory at all price points will help improve market performance by bringing supply into better balance with demand, but the added sales, particularly on the higher end, will also increase the number and quality of the market comparables used by appraisers to assign valuations. Once appraisals improve, foreclosures will ease, blunting their drag on the market and making it less likely that Fannie Mae, Freddie Mac, and even FHA will need help from the taxpayer.
“Then we’ll be set for a durable economic expansion,” he said.
New-home sales, which comprise about 10 percent of the market, will continue at suppressed levels--about 550,000 units, down from more than a million during the boom--mainly because builders have scaled projects way back, in part because financing isn't available.
"Weakness in new-home sales shouldn’t be viewed as tepid demand," he said.
Even under the most positive economic scenario, unemployment will remain elevated through 2010. Yun is predicting unemployment to stay near double-digits going into 2011, qualifying this recession, as some economists have, as the "Great Recession.”
For the longer term, the huge deficit run up by the federal government to shore up the economy remains the big question mark. Although the deficit is expected to improve each of the next three years, it will remain at historic highs. Unless the federal government releases a credible plan for shrinking it, investors will start to balk and interest rates will need to rise to bring them back. Should inflation be the result, the housing recovery will be set back.
Source: Robert Freedman, REALTOR® magazine
Tuesday, November 10, 2009
Market Update - November/2009
To say that 2009 has been an interesting year thus far would be a huge understatement. The true impact of a global economy has become part of the world’s consciousness. Billions upon billions of tax payer dollars have been poured into various state and government programs to hopefully stem the tide of growing unemployment. The stock market has wreaked havoc with individual’s retirement funds and future plans. Real estate values have tumbled across nearly all sectors of the American landscape. A pessimist would say the sky is falling. An optimist would say there is opportunity to be had here.
A brief article in the Denver Post newspaper (11/8/2009) had the following headline: Homebuilders on the hunt for land as prices stabilize. The article talks about large production builders i.e. Ryland Group Inc. and Meritage Homes Corp. purchasing land for new home development in areas like Southern California, Las Vegas and Orlando. These have been some of the hardest hit housing markets in the nation.
Real estate markets fall quickly and recover slowly. Two things normally signal an upbeat in real estate activity: (1) Sales trends having stabilized and beginning to move upward, and (2) New home construction increasing. For the past two months, Boulder County SOLD listings have mirrored 2008: 471 single family home sales in 2009 vs. 483 in 2008; 197 attached unit sales in 2009 vs. 186 in 2008.
During the last two years there has been minimal new home construction across the Boulder Valley. In a balanced real estate market, where there are a reasonable number of home buyers and an acceptable number of properties for sale, new home construction becomes part of the housing landscape. Homebuyers contract to have new homes built and builders are willing to take the risk of building “spec homes” anticipating they will attract a buyer during the construction phase.
Risk versus reward is the key element in most real estate transactions and it doesn’t apply solely to the buyer and seller. Standing in the wings is a third entity and, in most cases, they are the determining factor in how this all plays out. They are the purveyor of the golden rule: He who has the gold makes the rules! They are the lender.
New home construction is dependent upon financing; financing of construction loans and financing of permanent loans when the home is completed. Builders are at the mercy of the lender. Most lenders today shy away from new home construction unless it is a “presale” and the lender’s risk is minimal. Want to build a spec home and get lender financing? Good luck finding a bank that will work with you without 30% to 40% down, two to three points over prime, etc. The good old days of 20% down construction loans at prime or prime plus one are history.
A brief article in the Denver Post newspaper (11/8/2009) had the following headline: Homebuilders on the hunt for land as prices stabilize. The article talks about large production builders i.e. Ryland Group Inc. and Meritage Homes Corp. purchasing land for new home development in areas like Southern California, Las Vegas and Orlando. These have been some of the hardest hit housing markets in the nation.
Real estate markets fall quickly and recover slowly. Two things normally signal an upbeat in real estate activity: (1) Sales trends having stabilized and beginning to move upward, and (2) New home construction increasing. For the past two months, Boulder County SOLD listings have mirrored 2008: 471 single family home sales in 2009 vs. 483 in 2008; 197 attached unit sales in 2009 vs. 186 in 2008.
During the last two years there has been minimal new home construction across the Boulder Valley. In a balanced real estate market, where there are a reasonable number of home buyers and an acceptable number of properties for sale, new home construction becomes part of the housing landscape. Homebuyers contract to have new homes built and builders are willing to take the risk of building “spec homes” anticipating they will attract a buyer during the construction phase.
Risk versus reward is the key element in most real estate transactions and it doesn’t apply solely to the buyer and seller. Standing in the wings is a third entity and, in most cases, they are the determining factor in how this all plays out. They are the purveyor of the golden rule: He who has the gold makes the rules! They are the lender.
New home construction is dependent upon financing; financing of construction loans and financing of permanent loans when the home is completed. Builders are at the mercy of the lender. Most lenders today shy away from new home construction unless it is a “presale” and the lender’s risk is minimal. Want to build a spec home and get lender financing? Good luck finding a bank that will work with you without 30% to 40% down, two to three points over prime, etc. The good old days of 20% down construction loans at prime or prime plus one are history.
Friday, November 6, 2009
Tax Credit For Homeowners
RISMEDIA - November 6, 2009
President Barack Obama has approved the first-time homebuyer tax credit extension which will extend the tax credit until April 30, 2010.
The extension is part of a $24 billion economic stimulus bill that will extend the $8,000 tax credit for homebuyers who are purchasing their first home from the current November 30 deadline and expands the program to offer a credit of $6,500 to homeowners who have lived in their current home for at least five years and are seeking to relocate.
The following details apply to the homebuyer tax credit expansion:
Who is Eligible
-First-time homebuyers, who are defined by the law as buyers who have not owned a principal residence during the three-year period prior to the purchase, may be eligible for up to an $8,000 tax credit.
-Existing homeowners who have been residing in their principal residence for five consecutive years out of the last eight and are purchasing a home to be their principal residence (“repeat buyer”), may be eligible for up to a $6,500 tax credit.
-All U.S. citizens who file taxes are eligible to participate in the program.
Income Limits
Homebuyers who file as single or head-of-household taxpayers can claim the full credit ($8,000 for first-time buyers and $6,500 for repeat buyers) if their modified adjusted gross income (MAGI) is less than $125,000.
-For married couples filing a joint return, the combined income limit is $225,000.
-Single or head-of-household taxpayers who earn between $125,000 and $145,000, and married couples who earn between $225,000 and $245,000 are eligible to receive a partial credit.
-The credit is not available for single taxpayers whose MAGI is greater than $145,000 and married couples with a MAGI that exceeds $245,000.
Effective Dates
-The eligibility period for the tax credit is for homes purchased after Nov. 6, 2009, and before May 1, 2010. However, home purchases subject to a binding sales contract signed by April 30, 2010, will qualify for the tax credit provided closing occurs prior to July 1, 2010.
Types of Homes that Qualify
-All homes with a purchase price of less than $800,000 qualify, including newly-constructed or resale, and single-family detached, townhomes or condominiums, provided that the home will be used as their principal residence. Vacation home and rental property purchases do NOT qualify.
Tax Credit is Refundable
-A refundable credit means that if the amount of income taxes you owe is less than the credit amount you qualify for, the government will send you a check for the difference.
-For example:
-A first-time buyer who qualifies for the full $8,000 credit who owes $5,000 in federal income taxes would pay nothing to the IRS and receive a $3,000 payment from the government. If you are due to receive a $1,000 refund, you would receive $9,000 ($1,000 plus the $8,000 first-time homebuyer tax credit).
-A repeat buyer who owes $5,000 would pay nothing to the IRS and receive $1,500 back from the government. If you are due to get a $1,000 refund, you would get $7,500 ($1,000 plus the $6,500 repeat buyer tax credit).
-All qualified homebuyers can take the tax credit on their 2009 or 2010 income tax return.
Payback Provisions
The tax credit is a true credit. It does not have to be repaid unless the home owner sells or stops using the home as their principal residence within three years after the purchase.
President Barack Obama has approved the first-time homebuyer tax credit extension which will extend the tax credit until April 30, 2010.
The extension is part of a $24 billion economic stimulus bill that will extend the $8,000 tax credit for homebuyers who are purchasing their first home from the current November 30 deadline and expands the program to offer a credit of $6,500 to homeowners who have lived in their current home for at least five years and are seeking to relocate.
The following details apply to the homebuyer tax credit expansion:
Who is Eligible
-First-time homebuyers, who are defined by the law as buyers who have not owned a principal residence during the three-year period prior to the purchase, may be eligible for up to an $8,000 tax credit.
-Existing homeowners who have been residing in their principal residence for five consecutive years out of the last eight and are purchasing a home to be their principal residence (“repeat buyer”), may be eligible for up to a $6,500 tax credit.
-All U.S. citizens who file taxes are eligible to participate in the program.
Income Limits
Homebuyers who file as single or head-of-household taxpayers can claim the full credit ($8,000 for first-time buyers and $6,500 for repeat buyers) if their modified adjusted gross income (MAGI) is less than $125,000.
-For married couples filing a joint return, the combined income limit is $225,000.
-Single or head-of-household taxpayers who earn between $125,000 and $145,000, and married couples who earn between $225,000 and $245,000 are eligible to receive a partial credit.
-The credit is not available for single taxpayers whose MAGI is greater than $145,000 and married couples with a MAGI that exceeds $245,000.
Effective Dates
-The eligibility period for the tax credit is for homes purchased after Nov. 6, 2009, and before May 1, 2010. However, home purchases subject to a binding sales contract signed by April 30, 2010, will qualify for the tax credit provided closing occurs prior to July 1, 2010.
Types of Homes that Qualify
-All homes with a purchase price of less than $800,000 qualify, including newly-constructed or resale, and single-family detached, townhomes or condominiums, provided that the home will be used as their principal residence. Vacation home and rental property purchases do NOT qualify.
Tax Credit is Refundable
-A refundable credit means that if the amount of income taxes you owe is less than the credit amount you qualify for, the government will send you a check for the difference.
-For example:
-A first-time buyer who qualifies for the full $8,000 credit who owes $5,000 in federal income taxes would pay nothing to the IRS and receive a $3,000 payment from the government. If you are due to receive a $1,000 refund, you would receive $9,000 ($1,000 plus the $8,000 first-time homebuyer tax credit).
-A repeat buyer who owes $5,000 would pay nothing to the IRS and receive $1,500 back from the government. If you are due to get a $1,000 refund, you would get $7,500 ($1,000 plus the $6,500 repeat buyer tax credit).
-All qualified homebuyers can take the tax credit on their 2009 or 2010 income tax return.
Payback Provisions
The tax credit is a true credit. It does not have to be repaid unless the home owner sells or stops using the home as their principal residence within three years after the purchase.
Tuesday, October 27, 2009
Market Update - October/2009
Real estate markets are always bottom-up markets. Which means? For a real estate market to sustain itself and flourish, the bottom of the market, that being the less expensive properties, must sell in a timely manner. When the bottom of the real estate market suffers, the entire market is negatively impacted.
The government’s $8,000 tax credit, which ends in late November/2009, unless there is an extension or change in the program, was designed to serve two purposes: (1) provide first-time home buyers an incentive to buy now, and (2) stimulate the housing market by getting entry level homes sold so current homeowners could “move-up” to more expensive properties. The result being that life would be breathed back into the overall housing market.
There were some hurdles to overcome to this seemingly perfect plan. First, with the economy limping along, home values had been driven down, resulting in a loss of homeowner equity. A home seller considering buying-up now had less cash in their current home to buy-up with. Second, almost overnight the home mortgage industry went from loaning money to anyone with a pulse to being over selective as to whom they would bless with their sacred funds. Finally, the uncertainty of the job market and the high unemployment rate has led to many potential move-up buyers deciding to rent rather than buy. This has resulted in the more expensive homes being forced under the boot of foreclosure or short sale, or they have become rental havens for those individuals choosing not to buy now or not having the ability to buy now.
Due to the government assistance program and reasonable mortgage interest rates being available, homes priced under $400,000 in Boulder County have sold reasonably well this year.
The government’s $8,000 tax credit, which ends in late November/2009, unless there is an extension or change in the program, was designed to serve two purposes: (1) provide first-time home buyers an incentive to buy now, and (2) stimulate the housing market by getting entry level homes sold so current homeowners could “move-up” to more expensive properties. The result being that life would be breathed back into the overall housing market.
There were some hurdles to overcome to this seemingly perfect plan. First, with the economy limping along, home values had been driven down, resulting in a loss of homeowner equity. A home seller considering buying-up now had less cash in their current home to buy-up with. Second, almost overnight the home mortgage industry went from loaning money to anyone with a pulse to being over selective as to whom they would bless with their sacred funds. Finally, the uncertainty of the job market and the high unemployment rate has led to many potential move-up buyers deciding to rent rather than buy. This has resulted in the more expensive homes being forced under the boot of foreclosure or short sale, or they have become rental havens for those individuals choosing not to buy now or not having the ability to buy now.
Due to the government assistance program and reasonable mortgage interest rates being available, homes priced under $400,000 in Boulder County have sold reasonably well this year.
Market Update - September/2009
In any type of real estate market, one thing holds true – price overcomes all objections. Price a property where it is perceived to be a great value in the marketplace and it will attract a buyer or buyers. It’s the nature of the beast; we humans being the beast; that a deal is a deal is a deal; and a deal creates interest, motivation, and ultimately action.
An excellent example of this are properties in foreclosure i.e. they are already bank owned or on the way to being bank owned, and short sales i.e. the bank has indicated they’ll take less for the property than the current owner owes because they don’t want to end-up owning the property. Both of these categories normally consist of properties priced well below what they originally sold for and what they would typically sell for in a balanced real estate market. Buyers of these types of homes usually fit into two categories: (1) Buyers looking for a good value in today’s market for a home they can live in. (2) Buyers speculating on the future of the local real estate market i.e. looking for potential appreciation. These can be either homeowners or investors.
This “new” economic age we are currently experiencing will create dynamic change for the future in the behavioral patterns of how we make decisions. Whether it’s in the purchase of a new car, a home, investing for retirement, etc. the “good old days” of unbridled economic growth and expanding net worth have been replaced by a more conservative approach to life. It will take us longer to make decisions and our decisions will be more economically based.
If this is true, what does the future of real estate hold for the Boulder Valley?
In a somewhat positive way, although it could be perceived by some as being negative, home values in the Boulder Valley did not appreciate at double digit rates from 2003 to 2007 like other areas of the country. Do I dare mention Florida, California, Nevada, and Arizona? The Boulder Valley had moderate appreciation in the 3% to 5% range each year. As such, when the sky fell across the country, the Boulder Valley skies turned slightly gray.
There is light at the end of the tunnel for our market area, but it will take time for that light to fully surface. We will need to weed our way through two things: (1) Reducing the number of foreclosure and short sale properties available. (2) Creating in the mind of the prospective buyer that real estate is a good long-term investment.
An excellent example of this are properties in foreclosure i.e. they are already bank owned or on the way to being bank owned, and short sales i.e. the bank has indicated they’ll take less for the property than the current owner owes because they don’t want to end-up owning the property. Both of these categories normally consist of properties priced well below what they originally sold for and what they would typically sell for in a balanced real estate market. Buyers of these types of homes usually fit into two categories: (1) Buyers looking for a good value in today’s market for a home they can live in. (2) Buyers speculating on the future of the local real estate market i.e. looking for potential appreciation. These can be either homeowners or investors.
This “new” economic age we are currently experiencing will create dynamic change for the future in the behavioral patterns of how we make decisions. Whether it’s in the purchase of a new car, a home, investing for retirement, etc. the “good old days” of unbridled economic growth and expanding net worth have been replaced by a more conservative approach to life. It will take us longer to make decisions and our decisions will be more economically based.
If this is true, what does the future of real estate hold for the Boulder Valley?
In a somewhat positive way, although it could be perceived by some as being negative, home values in the Boulder Valley did not appreciate at double digit rates from 2003 to 2007 like other areas of the country. Do I dare mention Florida, California, Nevada, and Arizona? The Boulder Valley had moderate appreciation in the 3% to 5% range each year. As such, when the sky fell across the country, the Boulder Valley skies turned slightly gray.
There is light at the end of the tunnel for our market area, but it will take time for that light to fully surface. We will need to weed our way through two things: (1) Reducing the number of foreclosure and short sale properties available. (2) Creating in the mind of the prospective buyer that real estate is a good long-term investment.
Market Update - August/2009
Life is a composite of highs and lows. There are the good times and there are the not so good times. Real estate markets possess a similar personality. When they are good, they have a tendency to flow naturally. Homes sell in a reasonable amount of time and buyers are happy to be paying fair market value for what they are purchasing, with the hope (promise) of long term appreciation. When real estate markets aren’t quite as good, they struggle along. Sellers need to deal with declining home values and reduced buyer interest and activity. This second scenario characterizes the Boulder Valley real estate market for the past few years.
As an example, in 2006 there were 4,327 single family home sales in the Boulder Valley; in 2007 there were 3,790; in 2008 there were 3,168; thus far in 2009, through July, there have been 1,405. Based on the current sales rate, that extrapolates out to approximately 2,177 single family home sales in the Boulder Valley for 2009. That’s almost half the number that sold in 2006.
Between the good times and the not so good times is a period of regeneration. It’s a settling out; a regrouping. That’s where the Boulder Valley real estate market is right now. The inventory of available properties is down approximately 17% for this time of year versus the summer peak of 2006. Bank foreclosures and short sales, still an integral element in the marketplace, are slowly being sold off. In this arena, first came the low end of the market (up to $400,000) for distressed properties, then the middle price range ($400,000 to $1,000,000) surfaced and now the upper end of the market ($1,000,000 plus) has made its presence known. It will take time to clear this inventory, but there are opportunities out there for buyers looking to “get a deal”.
In an economic stressed climate, real estate markets are the first aspect of the economy to be impacted negatively. As the economy improves, real estate markets are the last facet to return to normalcy. Today, there is some degree of light at the end of the tunnel, but we are still a ways from standing once again fully in the light. It will take time for the Boulder Valley real estate market to become a balanced entity, where buyers and sellers exist on equitable ground.
In the future, though, things will not be the same as before as it relates to buying and selling real estate. Mortgage lenders will continue to take a sharper look at a buyer’s qualifications and financial history. Appraisers will take a more detailed approach to appraising property. Lender underwriters will require more and more documentation, etc. before they are willing to “sign-off” on a new loan package. Home sellers and Realtors will be faced with a growing list of disclosure documents, designed to protect and inform potential buyers about the condition of a specific property.
The good times that we once enjoyed will again surface, but they will be different. Buyers will be more informed and more selective. Sellers will need to be more realistic in pricing and condition. Realtors will need to communicate more effectively and be more in-touch with market conditions. Life moves much more quickly these days than at any time in history. To keep pace with change will be a challenge, but that’s what makes life interesting … the highs and lows.
As an example, in 2006 there were 4,327 single family home sales in the Boulder Valley; in 2007 there were 3,790; in 2008 there were 3,168; thus far in 2009, through July, there have been 1,405. Based on the current sales rate, that extrapolates out to approximately 2,177 single family home sales in the Boulder Valley for 2009. That’s almost half the number that sold in 2006.
Between the good times and the not so good times is a period of regeneration. It’s a settling out; a regrouping. That’s where the Boulder Valley real estate market is right now. The inventory of available properties is down approximately 17% for this time of year versus the summer peak of 2006. Bank foreclosures and short sales, still an integral element in the marketplace, are slowly being sold off. In this arena, first came the low end of the market (up to $400,000) for distressed properties, then the middle price range ($400,000 to $1,000,000) surfaced and now the upper end of the market ($1,000,000 plus) has made its presence known. It will take time to clear this inventory, but there are opportunities out there for buyers looking to “get a deal”.
In an economic stressed climate, real estate markets are the first aspect of the economy to be impacted negatively. As the economy improves, real estate markets are the last facet to return to normalcy. Today, there is some degree of light at the end of the tunnel, but we are still a ways from standing once again fully in the light. It will take time for the Boulder Valley real estate market to become a balanced entity, where buyers and sellers exist on equitable ground.
In the future, though, things will not be the same as before as it relates to buying and selling real estate. Mortgage lenders will continue to take a sharper look at a buyer’s qualifications and financial history. Appraisers will take a more detailed approach to appraising property. Lender underwriters will require more and more documentation, etc. before they are willing to “sign-off” on a new loan package. Home sellers and Realtors will be faced with a growing list of disclosure documents, designed to protect and inform potential buyers about the condition of a specific property.
The good times that we once enjoyed will again surface, but they will be different. Buyers will be more informed and more selective. Sellers will need to be more realistic in pricing and condition. Realtors will need to communicate more effectively and be more in-touch with market conditions. Life moves much more quickly these days than at any time in history. To keep pace with change will be a challenge, but that’s what makes life interesting … the highs and lows.
Market Update - July/2009
Numbers! What would the world be like without numbers? What would our lives be like without numbers? We wouldn’t know how old we were (maybe a good thing) or what time our favorite show appeared on television (maybe a bad thing) or when we were supposed to be at work (we would just show-up or not). We’d all become followers of the sun for telling time. But numbers do exist and they are an important part of our daily lives.
As they relate to real estate, numbers are certainly the most critical element buyers and sellers are faced with. How much should I sell my home for (a number)? How much should I buy a home for (a number)? How much can I borrow (a number)? How much is that doggie in the window (sorry, I digress)? Below are some numbers that are representative of the business of real estate.
1. Median Price: The Median Price of a geographic area (subdivision, community, county, etc.) is where an equal number of sold properties are on each side of the number in the middle. As an example, in the numeric sequence 5, 9, 12, 17, 47, the Median Price is 12.
2. Average Price: The Average Price is the value of all the sold properties added together and then divided by the number of sold properties. Using the numeric sequence above, the Average Price is 18. In this example, one number (47) can skew the overall average. Four of the properties actually sold for “less” than the Average Price.
3. Absorption Rate: The Absorption Rate is the time it would take to sell all the homes in a geographic area assuming two things: (1) The sales rate remains the same as it has been for a specific period of time. (2) No new listings come into the market. As an example, there are 39 active listings in a community. Over the course of the past six months eighteen homes have sold in that community. Based on that sales rate (3 per month), it would take thirteen months for the market to “absorb” the current inventory of homes.
As they relate to real estate, numbers are certainly the most critical element buyers and sellers are faced with. How much should I sell my home for (a number)? How much should I buy a home for (a number)? How much can I borrow (a number)? How much is that doggie in the window (sorry, I digress)? Below are some numbers that are representative of the business of real estate.
1. Median Price: The Median Price of a geographic area (subdivision, community, county, etc.) is where an equal number of sold properties are on each side of the number in the middle. As an example, in the numeric sequence 5, 9, 12, 17, 47, the Median Price is 12.
2. Average Price: The Average Price is the value of all the sold properties added together and then divided by the number of sold properties. Using the numeric sequence above, the Average Price is 18. In this example, one number (47) can skew the overall average. Four of the properties actually sold for “less” than the Average Price.
3. Absorption Rate: The Absorption Rate is the time it would take to sell all the homes in a geographic area assuming two things: (1) The sales rate remains the same as it has been for a specific period of time. (2) No new listings come into the market. As an example, there are 39 active listings in a community. Over the course of the past six months eighteen homes have sold in that community. Based on that sales rate (3 per month), it would take thirteen months for the market to “absorb” the current inventory of homes.
Market Update - June/2009
As we begin the trek toward the dog days of summer, below are some thoughts about the nature of the home mortgage industry and the real estate market in general. It’s important to understand and acknowledge that the old way of purchasing real estate i.e. do you have a pulse and can you spell your name, as the only criteria for acquiring a loan, are gone forever. Lenders, appraisers and title companies today are no longer risk oriented. They are playing by a whole new set of rules and the rules aren’t always particularly favorable to the buyer or seller.
Financing in today’s real estate market is taking longer to obtain and more difficult to get. When a lender says we can get you approved in twenty-four or forty-eight hours, that usually means we can get you approved subject to an acceptable appraisal and you bringing in every financial document you’ve ever owned for us to cull over. If your loan is being sold into the secondary market i.e. Fannie Mae or Freddie Mac, it better be an A+ loan or the lender will have to belly-up to the bar with the funds. Fannie Mae and Freddie Mac are not in the business of being the depository for loans that may potentially go south. They have too many of those on the books right now.
In today’s economic client, most people are looking for a deal. Whether it’s the best price on a home, a car or your cable bill. This is the age of “negotiation”. As such, many lenders are willing to negotiate to get your loan. They’ll use phrases like … no problem getting you approved in two weeks … or … low/no closing costs … or … we can get you a loan 1% under the market … etc. Be cautious of lenders bearing gifts; read the fine-print; make-sure you understand the Truth in Lending disclosure. What appears on the surface to sound great, may result in not being what you envisioned or what you were led to believe.
The Boulder County real estate market continues to ebb along. The inventory of available single-family homes is down slightly over 14% this time of year versus last year. Through May, sales are off around 38% for single-family homes and the same for attached units as compared to 2008. The spring sales push, which the market normally experiences, has not exhibited the same level of energy this year as the previous three years. Homes continue to sell, and sales are increasing, but not an exponential rate.
So, the question in most people’s minds is: Where to do we go from here if we want to buy or sell real estate? Unfortunately, there’s no simple answer to that question. People who are attuned to risk see this as an opportune time to take advantage of current market conditions and invest in real estate. They look for deals. They are willing to negotiate. They know that real estate markets have historically trended-up over time.
Other people may be much more conservative. Risk isn’t in their blood. They have a tendency to wait and see what happens rather than try to anticipate what might happen. Often the path of least resistance is not to leap, but rather to sit on the sidelines and get in the game when the timing feels comfortable to them. No problem with that.
For those individuals who are willing to roll the dice and step to the starting line, now is an excellent time to give some consideration to making that move or to invest in real estate. There are opportunities out there to be had. Motivated sellers and relatively low mortgage interest rates make for good bed fellows.
Financing in today’s real estate market is taking longer to obtain and more difficult to get. When a lender says we can get you approved in twenty-four or forty-eight hours, that usually means we can get you approved subject to an acceptable appraisal and you bringing in every financial document you’ve ever owned for us to cull over. If your loan is being sold into the secondary market i.e. Fannie Mae or Freddie Mac, it better be an A+ loan or the lender will have to belly-up to the bar with the funds. Fannie Mae and Freddie Mac are not in the business of being the depository for loans that may potentially go south. They have too many of those on the books right now.
In today’s economic client, most people are looking for a deal. Whether it’s the best price on a home, a car or your cable bill. This is the age of “negotiation”. As such, many lenders are willing to negotiate to get your loan. They’ll use phrases like … no problem getting you approved in two weeks … or … low/no closing costs … or … we can get you a loan 1% under the market … etc. Be cautious of lenders bearing gifts; read the fine-print; make-sure you understand the Truth in Lending disclosure. What appears on the surface to sound great, may result in not being what you envisioned or what you were led to believe.
The Boulder County real estate market continues to ebb along. The inventory of available single-family homes is down slightly over 14% this time of year versus last year. Through May, sales are off around 38% for single-family homes and the same for attached units as compared to 2008. The spring sales push, which the market normally experiences, has not exhibited the same level of energy this year as the previous three years. Homes continue to sell, and sales are increasing, but not an exponential rate.
So, the question in most people’s minds is: Where to do we go from here if we want to buy or sell real estate? Unfortunately, there’s no simple answer to that question. People who are attuned to risk see this as an opportune time to take advantage of current market conditions and invest in real estate. They look for deals. They are willing to negotiate. They know that real estate markets have historically trended-up over time.
Other people may be much more conservative. Risk isn’t in their blood. They have a tendency to wait and see what happens rather than try to anticipate what might happen. Often the path of least resistance is not to leap, but rather to sit on the sidelines and get in the game when the timing feels comfortable to them. No problem with that.
For those individuals who are willing to roll the dice and step to the starting line, now is an excellent time to give some consideration to making that move or to invest in real estate. There are opportunities out there to be had. Motivated sellers and relatively low mortgage interest rates make for good bed fellows.
Market Update - May/2009
If you read the newspaper, watch the news on television or religiously track the ups and downs of the stock market, there appears to be a general feeling in people’s minds that things are getting better economically in this country. At least on the surface, they don’t appear to be getting worse.
According to the Federal Government, job losses continue, but at a slower rate than has been experienced recently. The stock market has rallied over the course of the past few months and regained a portion of its losses. Home mortgage interest rates continue to vacillate between 4.75% and 5.25% for a fixed-rate thirty year loan. Most of us have survived the two great government revenue source days – income tax day (April 15th) and property tax day (April 30th).
One of the methods of evaluating today’s local real estate market is to take a look back. To compare what has happened in the past to what is happening now. An area that many homeowners are concerned about is the value of their home. How has it been impacted over the course of the past few years?
Since 2006, the average sales value for a single family home in the Boulder Valley real estate market has declined approximately 6.94% or slightly over 2% per year. What are some of the reasons for this?
The one you might initially consider is that home values have declined. There is some degree of truth to that. In a negatively impacted economic environment, more expensive homes normally feel the price pinch first. As such, the average sales price of all the homes in a particular market drops.
Another reason for a lower average sales price is that more homes are selling on the lower end and thus the average sales price is less. This is true of the Boulder Valley real estate market as lower mortgage interest rates and government tax incentives have brought more first-time home buyers into the market.
A third reason is the impact on values from bank foreclosures and HUD properties. These properties often, but not always, sell below area home values. This impacts the average sales price of a neighborhood and geographic area. It also affects appraised values of other homes.
Finally, there are the occasional “fire sales”, where a homeowner desperately needs to sell. This is most often because of personal reasons i.e. job loss, divorce, health reasons, change of life circumstances, economic conditions, etc. Basically, the seller simply needs to rid themselves of their home so they can move-on with their lives.
According to the Federal Government, job losses continue, but at a slower rate than has been experienced recently. The stock market has rallied over the course of the past few months and regained a portion of its losses. Home mortgage interest rates continue to vacillate between 4.75% and 5.25% for a fixed-rate thirty year loan. Most of us have survived the two great government revenue source days – income tax day (April 15th) and property tax day (April 30th).
One of the methods of evaluating today’s local real estate market is to take a look back. To compare what has happened in the past to what is happening now. An area that many homeowners are concerned about is the value of their home. How has it been impacted over the course of the past few years?
Since 2006, the average sales value for a single family home in the Boulder Valley real estate market has declined approximately 6.94% or slightly over 2% per year. What are some of the reasons for this?
The one you might initially consider is that home values have declined. There is some degree of truth to that. In a negatively impacted economic environment, more expensive homes normally feel the price pinch first. As such, the average sales price of all the homes in a particular market drops.
Another reason for a lower average sales price is that more homes are selling on the lower end and thus the average sales price is less. This is true of the Boulder Valley real estate market as lower mortgage interest rates and government tax incentives have brought more first-time home buyers into the market.
A third reason is the impact on values from bank foreclosures and HUD properties. These properties often, but not always, sell below area home values. This impacts the average sales price of a neighborhood and geographic area. It also affects appraised values of other homes.
Finally, there are the occasional “fire sales”, where a homeowner desperately needs to sell. This is most often because of personal reasons i.e. job loss, divorce, health reasons, change of life circumstances, economic conditions, etc. Basically, the seller simply needs to rid themselves of their home so they can move-on with their lives.
Market Update - April/2009
The first quarter of 2009 has seen the Boulder Valley housing market continue to experience lingering signs of hibernation. Although home mortgage interest rates have hovered between 4.5% and 5.25% (30-year fixed rate mortgage) for the past few months, that in itself has not grabbed the attention of enough prospective homebuyers. The government has attempted to incorporate some energy into the marketplace by implementing the first-time homebuyer credit of $8,000, designed to boost the lower end of the market, which would, hopefully, invigorate the market for “move-up” buyers.
Here are some thoughts about what is happening in the current Boulder Valley real estate market as we begin the journey into the spring and summer, which are historically the busiest times of the year for home sales.
• Rental rates have been increasing over the course of the past year as many potential homebuyers choose to rent rather than buy. There are a variety of reasons for this from job instability, to the inability to obtain financing, to concern about where home values are going.
• A lack of in-coming relocation. Most local companies aren’t in the hiring or expansion mode right now. If they are, there seems to be enough area talent available to fill most corporate needs. The sale of the STC site in Louisville to ConocoPhillips was viewed as potentially having a major positive impact on the local economy and housing market, but ConocoPhillips has rethought their plans with the first phase of construction now projected to be completed by 2013.
• New listing inventory across the Northern Colorado housing market has declined 18.45% when comparing first quarters of each year (2008: 6,232 new listings; 2009: 5,082 new listings). There are several reasons for this from the lack of new home construction, to higher priced properties being pulled from the market and rented, to many prospective sellers choosing other options i.e. remodeling their home or waiting for the market to improve.
Here are some thoughts about what is happening in the current Boulder Valley real estate market as we begin the journey into the spring and summer, which are historically the busiest times of the year for home sales.
• Rental rates have been increasing over the course of the past year as many potential homebuyers choose to rent rather than buy. There are a variety of reasons for this from job instability, to the inability to obtain financing, to concern about where home values are going.
• A lack of in-coming relocation. Most local companies aren’t in the hiring or expansion mode right now. If they are, there seems to be enough area talent available to fill most corporate needs. The sale of the STC site in Louisville to ConocoPhillips was viewed as potentially having a major positive impact on the local economy and housing market, but ConocoPhillips has rethought their plans with the first phase of construction now projected to be completed by 2013.
• New listing inventory across the Northern Colorado housing market has declined 18.45% when comparing first quarters of each year (2008: 6,232 new listings; 2009: 5,082 new listings). There are several reasons for this from the lack of new home construction, to higher priced properties being pulled from the market and rented, to many prospective sellers choosing other options i.e. remodeling their home or waiting for the market to improve.
Market Update - March/2009
Here we are again, on the brink of a bright new spring. For those of us still standing, 2008 will be remembered as one of those years that was overflowing with change. Not that most of us were in favor of the change we experienced from an economic perspective. As the golf god says: “He giveth and he taketh away.” Our economic god mostly took this past year. But, like all things in life, this too shall pass. Time will slowly move us forward in a positive direction and we will be left to deal with other elements of change in our lives.
Since this Market Update is intended to be about real estate and not solely economics, let’s take a look at change as it relates to the local real estate market. Below is information provided by IRES, the Northern Colorado Multiple Listing Service detailing listing and sales activity for the past five years for residential properties in Boulder County.
• The inventory of new listings coming into the marketplace begins to increase in late winter and then starts to decline in late summer. Sales follow a similar pattern. It’s called the bell curve concept of real estate.
• The inventory of new listings peaked in 2007. Since then we have seen a reduction each of the past two years in new listings. That pattern should continue this year with less new construction occurring and the rental market being reasonably healthy.
• Overall sales activity has continued to decline the past two years. One of the major reasons for a reduction in the number of sold properties is the lack of a domino effect i.e. I need to sell my home before I can buy your home.
• From 2004 through 2007, the Boulder County real estate market was somewhat stable. Sold properties as a percentage of available listings remained relatively balanced.
Since this Market Update is intended to be about real estate and not solely economics, let’s take a look at change as it relates to the local real estate market. Below is information provided by IRES, the Northern Colorado Multiple Listing Service detailing listing and sales activity for the past five years for residential properties in Boulder County.
• The inventory of new listings coming into the marketplace begins to increase in late winter and then starts to decline in late summer. Sales follow a similar pattern. It’s called the bell curve concept of real estate.
• The inventory of new listings peaked in 2007. Since then we have seen a reduction each of the past two years in new listings. That pattern should continue this year with less new construction occurring and the rental market being reasonably healthy.
• Overall sales activity has continued to decline the past two years. One of the major reasons for a reduction in the number of sold properties is the lack of a domino effect i.e. I need to sell my home before I can buy your home.
• From 2004 through 2007, the Boulder County real estate market was somewhat stable. Sold properties as a percentage of available listings remained relatively balanced.
Market Update - February/2009
Real estate market activity across the Northern Colorado and metro Denver market area continues to limp along waiting for the Federal government to throw a lifeline to the national housing market.
During the presidential campaign, Barack Obama said: “You can put lipstick on a pig, but it’s still a pig.” This “bail-out plan” conceived by two disparate political parties has that same feeling. Housing markets don’t magically change the path they are on my slapping some lipstick on them. They are slow moving entities composed of numerous elements i.e. mortgage lenders, appraisers, inspectors, etc. Not to forget the two key elements of any housing market are buyers and sellers. What has been missing from the market over the course of the past two to three years has been an ample supply of buyers. Not lookers or maybes, but real buyers. People willing to step to the closing table and sign their name(s) on the dotted line.
What has kept them from doing this in large numbers is two-fold: motivation and availability. Motivation can be a result of several things i.e. concern about the direction of housing values, concern about job stability, ability to qualify for financing, etc. Availability relates directly to the mortgage industry. For a period of time, mortgage lenders adjusted their strategy from lending to anyone with a pulse to lending, at an exorbitant rate and terms, only to A+ buyers. People like Bill Gates, Warren Buffet and Donald Trump come to mind. Well, maybe not Donald Trump.
For the housing market to stabilize and begin to move toward a more balanced playing field will require several things to happen.
1. Home values to settle. The “median price” of a single family home in the Northern Colorado market area was $208,265 (January/2009); $218,500 (January/2008); and $235,000 (January/2007). A reduction of over 11% in the past two years.
2. Realistic number of available properties for sale. Scarcity creates demand. The Northern Colorado housing market hasn’t reached that point, although the inventory of available properties has continued to decline. In January/2009 there were 1,535 new listings in our market area; 1,940 in January/2008; and 1,892 in January/2007. A reduction of about 19% this past January compared to January/2007.
3. Changes in the mortgage industry. We are a country that relies to a great degree on the financing of most things we buy whether it is via credit cards, automobile leases or real estate purchases. For the housing market to shift in a positive direction, the mortgage industry needs to help create “in the mind of the consumer” that this is a great time to buy real estate. That can be accomplished by (1) Increasing the maximum loan amount for conforming loans; now $460,000 for Boulder County. Most Colorado counties remain at $417,000 for single family residences. When a buyer exceeds the maximum conforming loan amount for the county in which the subject property is located, they normally have two options regarding financing – obtain a Jumbo loan (usually at an interest rate 1%+ higher than a conforming loan) or get a second mortgage to go with the conforming first. (2) Work with prospective buyers to find creative ways to provide financing that fits the buyer’s ability to qualify and make the payments i.e. loosen the purse strings a little.
During the presidential campaign, Barack Obama said: “You can put lipstick on a pig, but it’s still a pig.” This “bail-out plan” conceived by two disparate political parties has that same feeling. Housing markets don’t magically change the path they are on my slapping some lipstick on them. They are slow moving entities composed of numerous elements i.e. mortgage lenders, appraisers, inspectors, etc. Not to forget the two key elements of any housing market are buyers and sellers. What has been missing from the market over the course of the past two to three years has been an ample supply of buyers. Not lookers or maybes, but real buyers. People willing to step to the closing table and sign their name(s) on the dotted line.
What has kept them from doing this in large numbers is two-fold: motivation and availability. Motivation can be a result of several things i.e. concern about the direction of housing values, concern about job stability, ability to qualify for financing, etc. Availability relates directly to the mortgage industry. For a period of time, mortgage lenders adjusted their strategy from lending to anyone with a pulse to lending, at an exorbitant rate and terms, only to A+ buyers. People like Bill Gates, Warren Buffet and Donald Trump come to mind. Well, maybe not Donald Trump.
For the housing market to stabilize and begin to move toward a more balanced playing field will require several things to happen.
1. Home values to settle. The “median price” of a single family home in the Northern Colorado market area was $208,265 (January/2009); $218,500 (January/2008); and $235,000 (January/2007). A reduction of over 11% in the past two years.
2. Realistic number of available properties for sale. Scarcity creates demand. The Northern Colorado housing market hasn’t reached that point, although the inventory of available properties has continued to decline. In January/2009 there were 1,535 new listings in our market area; 1,940 in January/2008; and 1,892 in January/2007. A reduction of about 19% this past January compared to January/2007.
3. Changes in the mortgage industry. We are a country that relies to a great degree on the financing of most things we buy whether it is via credit cards, automobile leases or real estate purchases. For the housing market to shift in a positive direction, the mortgage industry needs to help create “in the mind of the consumer” that this is a great time to buy real estate. That can be accomplished by (1) Increasing the maximum loan amount for conforming loans; now $460,000 for Boulder County. Most Colorado counties remain at $417,000 for single family residences. When a buyer exceeds the maximum conforming loan amount for the county in which the subject property is located, they normally have two options regarding financing – obtain a Jumbo loan (usually at an interest rate 1%+ higher than a conforming loan) or get a second mortgage to go with the conforming first. (2) Work with prospective buyers to find creative ways to provide financing that fits the buyer’s ability to qualify and make the payments i.e. loosen the purse strings a little.
Market Update - January/2009
The 2008 real estate market followed a similar pattern to the past few years with sales activity across the area experiencing a continuing decline. In 2005, there were 4,725 single-family homes sold in the Boulder Valley area; in 2006 (4,389); in 2007 (4,076); and in 2008 (3,393). Since 2005, that’s a reduction of nearly 40% in the number of sales. During this same period of time, the number of new listings has dropped 22.84%.
For real estate markets to sustain themselves in a positive direction they need to churn. They need to have a consistent influx of buyers and an on-going flow of available inventory. When that happens, home values remain relatively constant or increase at a reasonable rate. When the real estate market gets skewed i.e. too many buyers, but not enough available inventory or too much available inventory, but not enough buyers, two things can happen – home values increase noticeably (demand exceeds supply) or home values decrease noticeably (supply exceeds demand).
Over the course of the past three years (January/2006 to December/2008) the Boulder Valley real estate market has seen the average sales price of a single-family home go from $440,236 (2006) to $456,295 (2007) to $428,326 (2008); an overall decrease of approximately 2.78%. Which means? The local real estate market has been relatively flat during the past thirty-six (36) months in terms of home values. Considering what has happened negatively to other real estate markets across the country, the Boulder Valley real estate market has held its home values during this economic downturn.
The questions then becomes, How did this happen? It’s back to the supply and demand overview noted above. Demand decreased nearly 40% in the past four years; supply decreased nearly 23% in the past four years. If supply hadn’t decreased, and demand remained the same, what would have happened to Boulder Valley real estate home values? Although this is possibly conjecture, it is based on other areas of the country where demand decreased noticeably, but supply continued to increase, home values experienced dramatic decreases.
The Boulder Valley real estate market has remained relatively stable over the past three years in terms of home values simply because available inventory has also adjusted downward. For a variety of reasons, people chose to either take their homes off the market or not put them on the market. Builders stopped building spec homes they couldn’t sell. Potential buyers became renters, resulting in homes for sale being withdrawn from the market. People decided to “settle-in” for the time being to see what happens in the marketplace.
For real estate markets to sustain themselves in a positive direction they need to churn. They need to have a consistent influx of buyers and an on-going flow of available inventory. When that happens, home values remain relatively constant or increase at a reasonable rate. When the real estate market gets skewed i.e. too many buyers, but not enough available inventory or too much available inventory, but not enough buyers, two things can happen – home values increase noticeably (demand exceeds supply) or home values decrease noticeably (supply exceeds demand).
Over the course of the past three years (January/2006 to December/2008) the Boulder Valley real estate market has seen the average sales price of a single-family home go from $440,236 (2006) to $456,295 (2007) to $428,326 (2008); an overall decrease of approximately 2.78%. Which means? The local real estate market has been relatively flat during the past thirty-six (36) months in terms of home values. Considering what has happened negatively to other real estate markets across the country, the Boulder Valley real estate market has held its home values during this economic downturn.
The questions then becomes, How did this happen? It’s back to the supply and demand overview noted above. Demand decreased nearly 40% in the past four years; supply decreased nearly 23% in the past four years. If supply hadn’t decreased, and demand remained the same, what would have happened to Boulder Valley real estate home values? Although this is possibly conjecture, it is based on other areas of the country where demand decreased noticeably, but supply continued to increase, home values experienced dramatic decreases.
The Boulder Valley real estate market has remained relatively stable over the past three years in terms of home values simply because available inventory has also adjusted downward. For a variety of reasons, people chose to either take their homes off the market or not put them on the market. Builders stopped building spec homes they couldn’t sell. Potential buyers became renters, resulting in homes for sale being withdrawn from the market. People decided to “settle-in” for the time being to see what happens in the marketplace.
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