Update: Will the 'Closing' Deadline for the Home Buyer Tax Credit Be Extended?

A quick update:  National Association of REALTORS is putting pressure on the federal government to extend the closing deadline so that buyers who ratified a contract for a home purchase by April 30th, 2010 but who can not close by the current deadline (June 30th) can still receive the tax credit if they were otherwise qualified.  This measure passed the House today, and could go to the Senate for a vote as early as tomorrow.  Stay tuned for more information as this story develops.

To Sell Now or Wait

Like many, you’ve probably been thinking about moving up to a larger home or downsizing, or perhaps even relocating. But, the market has meant declining house values, and you’re concerned that if you don’t get enough for your home, you’ll not be able to afford what you really want in your NEXT home.

Did I hit the nail on the head for you? You’re not alone. It’s always easiest to focus on the scary, negative thoughts – fear is a powerful emotion, in fact, THE most powerful emotion we have as humans. But, as humans, we have the ability to overcome illogical fear if we’re willing to. Let me point out some things you may not know, or may not have put together.

SUPPLY AND DEMAND: Because of a decrease in supply for much of this year, home values in some areas have started to rebound slightly, and are making the sales process (when you price “right”) easy for sellers. But, that won’t last forever… banks are holding a plethora of homes in inventory (either they’ve stalled the foreclosure process or they haven’t released foreclosed homes for sale, for a variety of reasons). We expect inventory to pick up after the first of the year – if that happens, it puts downward pressure on prices for YOUR home. And, if you’re trying to wait out the storm, you could be there a long while.

COMPARE THE SUBMARKETS: If your current home's value is less than $500K in Loudoun or $750K in Fairfax County, it's likely that supply is low, and demand for your home is high. 

However, at higher price points in the same area, that's not the case.  So, if you are "trading up" you may benefit from a seller's market when you sell and a buyer's market where you buy. 

If you're relocating, you'll soon realize that our Washington DC submarket is quite different from other areas of the country.  Many areas have massively depressed home prices allowing you to scoop up amazing deals.  While buyers markets are found in many areas, some of the best opportunities include Detroit, Michigan, most of Florida, the Las Vegas area and far more.

So, whether you're moving up or relocating, you have a very good chance of benefitting from seller market conditions when you sell, and buyer market conditions when you buy.  Can it really get better than that?

INTEREST RATES: Let’s face it, Americans buy with loans… therefore, the interest rate for loans impacts you as both a seller and a buyer. Right now, the fed’s rate is 0% and it can not go any lower. To artificially DEFLATE interest rates and spur more home buying activity, the fed has been buying mortgage backed securities. This has resulted in a “typical” 6% interest rate being reduced to an average hovering around 5%.

What does this mean in dollars? Well, for every 1% increase in interest rate, if you want to keep your payment identically the same, the price of the home must be 10% less. So, buyers that can pay $500K for your home today with a 5% interest rate, will only be able to pay $450K for it at a 6% interest rate. I bet you’d like to keep that $50K in your pocket, wouldn’t you?

And, this won’t last forever either. In fact, the fed has announced it will be phasing these purchases out and no longer plans to buy these mortgage backed securities after the first quarter of next year. That means if you are thinking of putting your house on the market in the spring, that could be a very poor decision.

EXPANDED TAX CREDIT: You’ve heard of the “First time home buyer tax credit” of up to $8,000? Well, that is coming to an end November 30th. BUT, it's being extended!  And, it gets better… the new version of this program is not just for first time home buyers any more! If you are a first time home buyer you can still get up to $8000.  Or, if you’ve owned a home for 5 of the last 8 years, this NEW credit’s for you, too! Plus, the income limits are being increased…. Allowing people with higher incomes ($125K for one person, $225K for a married couple) to take advantage of the maximum credit. If this passes, it will expire APRIL 30th.

This affects you as a buyer and as a seller. You may be eligible as a buyer; but even if not, your buyer may be eligible, and certainly many buyers in the market will be eligible, spurring activity and urgency to buy before April 30th of next year.

Check out the highlights of this bill: http://www.realtor.org/fedistrk.nsf/files/government_affairs_tax_credit_ext_chart_110409.pdf/$FILE/government_affairs_tax_credit_ext_chart_110409.pdf

** As an aside, please know that the National REALTOR Association worked hard to make this happen.  Your national, state and local REALTOR associations are always looking out for you, property owner rights, and small business owners, as well as for our economy overall.  This bill is only one example of the fruits of our labor.

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Still not convinced? Call me for a personal consultation. I will be glad to help you sort through this, and other economic news, as well as to discuss your family’s specific situation and help you strategize to make the most of what’s available to you.

www.VickyChrisner.com

Ofc: 703-669-3142

VChrisner@KW.com

Update: Why This Is Still A Buyers Market

With the $8000 tax credit almost gone, why is this STILL a good time to buy?

PRICES (More House For Less)

Some submarkets have “hit bottom”. In the Washington DC metro area, the industry professionals and economic experts believe that pricing for the lower half of the market (generally, under $500,000 in Loudoun; under $750,000 in Fairfax County) are as low as they are going to go, and many are predicting prices will start to increase, and in fact, in some areas, we’ve already seen that.

INTEREST RATES (Low Rates = Affordability)

The Fed’s rate is 0%, which is as low as it can go. To artificially deflate interest rates, the federal government has been purchasing mortgage backed securities. They intend to phase this out by the end of the first quarter of 2010.

This effectively means that interest rates are artificially low right now – hovering around 5%. After the first quarter of next year, interest rates are expected to increase to an average of 6%. For every 1% increase in interest rates, to keep your payment the same, you must purchase a home that has a price that is 10% less. In other words, if today you can comfortably buy a home that is $500,000; by next spring you may only be able to afford a home that is $450,000. That makes a substantial difference in the amenities of the home you can buy.

TAX CREDIT – Extended and Expanded

Last, but certainly not least, the tax credit dubbed the “first time home buyer credit” is being extended, and expanded.... and it's not just for first time home buyers anymore!

First time home buyers can still get a maximum of $8,000 in tax credits. However, many more will find advantages as eligibility is expanded to anyone who has owned a home for 5 of the last 8 years, and income limits are increased.  To take advantage of this new program, you must be under contract by April 30th and will have until July to actual settle on the property.

Read highlights of this bill:                                                                                                  
http://www.realtor.org/fedistrk.nsf/files/government_affairs_tax_credit_ext_chart_110409.pdf/$FILE/government_affairs_tax_credit_ext_chart_110409.pdf

No one expects further extension or expansion beyond that point.... so take advantage of the gift while you can!

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Still not convinced? Let’s talk. Let me show you what homeownership in the long run can do for your personal wealth, the continued affordability of your housing expenses and the quality of life for you and your family.

Vicky Chrisner

www.VickyChrisner.com

703-669-3142

VHDA's Got Your Down Payment - The Time to Buy is Now

The Virginia Housing Development Authority has rolled out a new program allowing qualified buyers to use their expected tax credit (max of $8,000) toward the down payment or closing costs when they purchase a new home. The program is called VHDA FHA Tax Credit Plus. This potentially could mean no money down loan options for some.

Buyers must meet all requirements for the VHDA FHA loans, including the income and sales price limits imposed on all VHDA loans, which means a household of 3 can not have income that exceeds $100,000; and the sales price of the home can not exceed $408,000.

The buyers must also qualify for the First Time Home Buyer tax credit which will be in the amount of 10% of the purchase price up to a maximum of $8000. A reduced tax credit is available to buyers whose income exceeds $75,000 (single filers) or $150,000 (joint filers).

The use of the tax credit will actually be done as a 2nd trust. It will be payment, interest and penalty fee for the first 12 months. If not paid by that time, the trust will convert and be amortized over the remaining 29 years at the same interest rate as the primary trust; with no penalty. With this program, VHDA is actually making it optional to pay the second trust off or just starting making the 2nd mortgage payment.

Please note the tax credit expires November 3oth, if you are thinking of buying, now is the time!

For more information about how to take advantage of today's real estate market, please contact me.

Vicky Chrisner

Keller Williams

703-669-3142

vchrisner@kw.com

http://www.vickychrisner.com/

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Special note: This is different from earlier guidance received. For practioners, please note that the funds MAY be used toward the down payment (not just closing costs as previously thought). This is because VHDA is a qualified non-profit, and is therefore exempt from the mortgagee letter that required maintaining the minimum investment of 3.5% on all FHA loans.

Use Your $8000 Tax Credit at Closing!

About a week and a half ago, there was a ruling allowing home buyers to use their First Time Home Buyer Credit (a max of $8000) toward closing costs. Today, VHDA (the Virginia Housing Development Authority) rolled out their plans implementing this program, and here are the highlights:

* The buyer's primary loan must be a VHDA FHA loan. There are income limits associated with obtaining VHDA loans, but the loans are generally below market rate. The income limits are adjusted based on family size, but for a 3 person household, the maximum income is $100,000.

* VHDA will basically "front" the buyer the tax credit - up to $8000 - to be used toward closing costs. (Note: Buyers must still invest 3.5% of the sales price as a down payment, and the tax credit can NOT be used to cover that minimum investment.)

The "fronting" of this money will be in the form of a second trust (aka a mortgage) which will be interest free for the first 12 months, allowing the buyer plenty of time to file for and receive their tax credit check, which should then be applied to pay off this loan.

* To claim the tax credit, buyers must CLOSE on their home no later than November 30th... so time is wasting! Take advantage of this loan program today.

It's a great new option for FHA buyers that qualify for a VHDA mortgage. For more information on this or other loan programs, call or email me. I am not a lender, but have alliances with several different lenders that offer different programs; and happily will refer you to the right loan counselor.

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Cindy Fox with SunTrust Mortgage provided this "Breaking News" to me this evening, allowing me to pass it on to you. She's a fabulous loan counselor familiar with all the government loan programs and options available to first time home buyers.

First Time Home Buyers

First time home buyers are starting to learn about the new tax credit of up to $8,000, and it is exciting them! It's evident in the online chats and at the water coolers across the nation. Combining that incentive with the incredible interest rates available today (many are under 5%), and the supply of available homes, it's a combination difficult to resist. Homes are more affordable today than they have been in a very, very long time.

And, first time home buyers are doing more than just chat. Here in Loudoun, they are taking action. In March, approximately 45% of the home purchases in the market were done with FHA and VA loans, most of which are first time home buyers.

Sales activity is up, again, in the region. In a year over year comparison, Loudoun's activity level has exceeded the prior year's activity for 10 straight months.

The result is that in the lower price points, inventory is declining. Buyers are finding that there are far less homes available than they anticipate, and the purchasing process can be very competitive, with contract prices often exceeding the list price.

Once they enter the market, first time home buyers are sometimes surprised at the amount of time it can take to find the right home and then successfully negotiate a deal. Short sales and REOs make for a complicated and turbulent process, and competent representation from a strong knowledgeable real estate consultant is required. With the tax credit set to expire December 1^st, home buyers interested in taking advantage of this credit should start talking to real estate professionals and lenders very soon.

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Buyers interested in learning more about the local real estate market in Loudoun and the Dulles area can contact me at vchrisner@kw.com.