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.
Friday, November 6, 2009
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.
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