SAN DIEGO REAL ESTATE AGENT BLOG » Real Estate Tax Credit

Could the Tax Credit Be Extended Again?

Michael Carter - San Diego Real Estate Agent — Mon, 22 Feb 2010 21:52:06 +0000

The pressure is increasing on Congress to renew the homebuyer tax credits for a third time.

The first $7,500 tax credit was passed in 2008 and required first-time buyers to repay the credit over 15 years. A few months later in 2009, Congress expanded the credit to a maximum of $8,000 that didn’t have to be paid back.

At the end of last year, Congress extended the benefit again until April 30 with an extra two months on top of that to close. A new credit of $6,500 was added for move-up buyers, too.

Now representatives of the housing industry are lobbying for another extension. Some experts, including Mark Zandi, chief economist at Moody’s Economy.com, who supported the earlier credits, think the time has come to let it go.

“It’s worn out its benefit,” he says. “If you extend it again, it isn’t going to do much, and what you’re doing is providing a tax break to folks who bought anyway.”

Source: The Wall Street Journal, Nick Timiraos (02/22/2010)

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

Fannie Mae Announces Deed for Lease Program

Michael Carter - San Diego Real Estate Agent — Thu, 12 Nov 2009 01:36:14 +0000

WASHINGTON, DC — Fannie Mae (FNM/NYSE) is implementing the Deed for Lease™ Program under which qualifying homeowners facing foreclosure will be able to remain in their homes by signing a lease in connection with the voluntary transfer of the property deed back to the lender.

“The Deed for Lease Program provides an additional option for qualifying homeowners who are facing foreclosure and are not eligible for modifications,” said Jay Ryan, Vice President of Fannie Mae. “This new program helps eliminate some of the uncertainty of foreclosure, keeps families and tenants in their homes during a transitional period, and helps to stabilize neighborhoods and communities.”

The new program is designed for borrowers who do not qualify for or have not been able to sustain other loan-workout solutions, such as a modification. Under Deed for Lease, borrowers transfer their property to the lender by completing a deed in lieu of foreclosure, and then lease back the house at a market rate.

To participate in the program, borrowers must live in the home as their primary residence and must be released from any subordinate liens on the property. Tenants of borrowers in this circumstance may also be eligible for leases under the program. Borrowers or tenants interested in a lease must be able to document that the new market rental rate is no more than 31% of their gross income.

Leases under the new program may be up to 12 months, with the possibility of term renewal or month-to-month extensions after that period. A Deed for Lease property that is subsequently sold includes an assignment of the lease to the buyer.

For additional information about the Deed for Lease Program, including full details on program eligibility, please review the Guide Announcement on www.efanniemae.com.

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

$8,000 homebuyers tax credit extended

Michael Carter - San Diego Real Estate Agent — Fri, 06 Nov 2009 21:45:39 +0000

President Obama reups popular tax credit through June 2010 and expands it to include people with higher incomes and some who want to trade up into new homes.

NEW YORK (CNNMoney.com) — President Obama signed an extension and expansion of the first-time homebuyers tax credit on Friday.

The $8,000 credit was scheduled to lapse on Dec. 1 but will now be in effect through the end of June. Homebuyers must sign a contract before April 30 and close by June 30. The income limits were also raised: Single buyers can now earn up to $125,000 and still get the full credit while a married couple can earn $225,000.

The bill also made more homeowners eligible to claim the credit on their taxes. First-time buyers — those who have not owned a home in the past three years — still qualify for an $8,000 rebate. But now people who want to trade up can also qualify. Those who have owned and occupied a residence for at least five years out of the past eight can claim a $6,500 tax credit if they close on a purchase by the end of June.

“The new version of the tax credit has the potential to stimulate the housing market even more than the old version due to the fact that more people will qualify under the new rules,” said Gibran Nicholas, chairman of the CMPS Institute, an organization that certifies mortgage bankers and brokers.

Who qualifies?

Nicholas provided four scenarios illustrating how the tax credit rules for existing homebuyers will apply:

• Harry owned a home in 2001 and 2002 but sold it to relocate for a job. He would qualify for the $8,000 first-time-buyer credit because he has not owned a home in the past three years.

• Sue purchased a home in 2004 and has lived there since. If she decides to buy a new home, she would qualify for the $6,500 tax credit because she has lived in the same residence for five consecutive years in the past eight.

• Jane purchased her home in 2002, lived there for five consecutive years before she rented it out in 2007. She would qualify because she was an owner/occupier for at least five consecutive years in the past eight.

• Mark purchased a home in 2006 and lived there for the past three years. He would not qualify because he is neither a first-time homebuyer nor someone who lived in the same primary residence for five consecutive years out of the past eight.

How it helps the economy

Legislators and industry experts expect that the credit will encourage buyers such as Jane and Sue to move up their purchase plans.

“This bill will shift demand from the second half of 2010 into the first half,” said Pat Newport, a real estate analyst with IHS Global Research. “As a result, home sales and prices will get a boost in the first half of 2010, with payback in the second.”

That’s not a bad thing, according to Bill Kilmer, vice president of advocacy for the National Association of Home Builders. It’s important to stabilize real estate markets quickly to help bring the economy out of its tailspin.

The original $8,000 tax credit appears to have helped accomplish that goal: Home prices have inched up the past few months, according to the S&P/Case-Shiller Home Price Index.

Would it have happened anyway?

But critics still see the program as being ineffectual because it rewards buyers who would have purchased a home anyway. Newport estimates that fewer than 400,000 of the 2 million who have claimed the original credit made their purchases solely because of the tax advantages.

Furthermore, buyers do not, in reality, receive the entire benefit. “The credit helped prices stabilize,” said Newport. “So the credit has been split between seller and buyer. The sellers are getting higher prices and buyers paying more than they would have without it.”

The housing industry, however, is pleased with the extension, although the credit has not been quite as effective as they hoped.

The industry thought the credit would provide a ripple effect, with sales to first timers triggering as many three additional “move-up” sales.

That did not happen, according to Lawrence Yun, NAR’s chief economist.

“It did not have the chain reaction impact it was supposed to,” he said. “Instead, many first-timers turned to vacant, foreclosed or other distressed properties the sellers of which were unlikely to be move-up buyers.”

So, the tax credit helped prop up the low end of the market without having much impact on the rest of the spectrum. Expanding the benefit to existing homeowners should boost those segments. That should produce additional benefits, according to Yun.

“Preventing further price decline or even nudging prices up a bit stabilizes housing wealth, which makes homeowners more comfortable in their spending,” said Yun. “They’re more likely to go out to the stores or buy a new car. That provides a boost to the overall economy.”

By Les Christie, CNNMoney.com staff writer

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

Both Houses OK Tax Credit Extension, Expansion

Michael Carter - San Diego Real Estate Agent — Fri, 06 Nov 2009 04:46:49 +0000

The House today and the Senate yesterday passed legislation to extend the $8,000 home buyer tax credit to May 1, 2010, for first-time buyers and add a $6,500 tax credit for repeat buyers if they’ve lived in their home for five of the past eight years. Home prices are capped at $800,000.

The legislation in both houses was included in a bill to extend unemployment benefits and is expected to be signed by President Obama shortly.

“REALTORS® appreciate the swift action by Congress to extend the home buyer tax credit and expand it to some current homeowners,” says NAR President Charles McMillan. “As the leading advocate of housing and real estate issues, we urge President Obama to sign this legislation into law quickly to keep the momentum going in the fragile recovery of the nation’s housing market.”

Under the bill, income limits are expanded to $125,000 for individuals and $225,000 for joint filers. Individuals with incomes up to $145,000 and joint filers with incomes up to $245,000 qualify for reduced credits.

Households who have binding contracts in place by April 30 will be allowed an additional 60 days to complete their transaction. The deadline for members of the military serving out the U.S. for at least 90 days between Jan. 1, 2009, and May 1, 2010, has been extended one year.

Taxpayers can claim the credit on their federal income tax returns. If the credit exceeds their tax bill, the government will issue a check. Taxpayers will be able to claim the credit on their 2009 income tax return for purchases made in 2010.

Source: The Associated Press

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

Senate May Approve Tax Credit Wednesday

Michael Carter - San Diego Real Estate Agent — Wed, 04 Nov 2009 19:52:26 +0000

The U.S. House and Senate are close to an agreement to extend the home buyer tax credit due to expire at the end of this month.

The Senate is expected to vote Wednesday while the House could approve it later in the week – likely before Friday when the monthly report on the unemployment rate will be released.

The measure that is slated to pass would cover homes under contract by April 30. Also, anyone taking the credit from a home purchased in 2010 would be able to take the credit when they pay their 2009 taxes.

First-time home buyers would be eligible for $8,000, but purchasers don’t have to be first-time buyers. Anyone who has owned a home for at least five years could get a $6,500 credit on a new residence.

Income limitations rise under the new plan with individuals earning up to $125,000 a year and couples earning up to $225,000 eligible. People who earn more would be eligible for smaller credits.

The New York Times, Jackie Calmes (11/4/2009)

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

Home Buyer Tax Credit Extension Likely

Michael Carter - San Diego Real Estate Agent — Fri, 09 Oct 2009 14:54:45 +0000

Extending the First-Time Home Buyer Tax Credit, due to expire at the end of November, is high on the Democratic Congressional to-do list, legislative aides said.

After Wednesday’s meeting with President Obama and House Speaker Nancy Pelosi (D-Calif.), Senate Majority Leader Harry Reid (D-Nev.) released a statement that the government should “continue efforts to strengthen the housing market by extending the home buyer tax credit.”

Mark Zandi, chief economist at Moody’s Economy.com, who is a consultant to Democrats in the administration and Congress, is advocating extending the credit through August and making it available to all home buyers. He said failure to extend the credit just as more foreclosures enter the market will push housing prices down.

Also, on Thursday, the House is expected pass legislation to extend the credit through 2010 for people who have been out of the country in the military, intelligence, or foreign services.

The New York Times, Jackie Calmes (10/07/2009)

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

Legislation introduced to keep tax credit alive

Michael Carter - San Diego Real Estate Agent — Mon, 28 Sep 2009 23:44:07 +0000

WASHINGTON — Will Congress extend the wildly popular $8,000 home-buyer tax credit beyond its Dec. 1 expiration date?

That’s a question generating huge pressure on Capitol Hill, from would-be buyers who haven’t found the right house to realty agents, builders, lenders and squads of lobbyists working on their behalf.

But here’s the first hint of an answer: On Sept. 17, the leadership of Congress’ primary tax legislative committee introduced a tax credit bill that’s likely to zip through the House and move to the Senate rapidly. Charles Rangel, chairman of the House Ways and Means Committee, sponsored the bipartisan Service Members Homeownership Tax Act (H.R. 3590), which would extend the credit for another 12 months for thousands of military, Foreign Service and intelligence agency personnel who’ve been posted abroad during 2009.

Rangel’s bill, with 29 co-sponsors, would keep the credit alive through Nov. 30, 2010, for service members who had at least 90 days of overseas duty assignments during 2009 and who otherwise meet the eligibility tests for the credit. The bill would also prohibit the IRS from “recapturing” the $8,000 credit when service members are forced to sell or rent out their houses because they are ordered to deploy to a different duty station, overseas or inside the country.

Under the regular rules of the program, buyers who obtain the credit must use their houses as a principal residence for 36 months or be required to repay the credit to the IRS. As a result of the 36-month rule, many military and diplomatic employees have been hesitant to buy a house and claim the credit, or are worried that their absence from the country could force them to repay the money.

For example, the spouse of a Foreign Service officer posted to the Philippines this summer for a two-year assignment wrote to Rep. Earl Blumenauer, D-Ore., to alert him to a flaw in the tax credit program. The Oregon couple bought their first home earlier this year, encouraged by affordable prices and the $8,000 credit. But having now been posted abroad, they cannot claim to occupy the house as their principal residence. Under current rules, they even face recapture of the full credit.

Blumenauer, who is a member of the Ways and Means Committee, said “it is absurd that thousands of Americans serving our country, away from friends and family, must choose between their service work and homeownership.” He wrote corrective legislative language that ultimately was incorporated into Rangel’s tax bill.

Though nothing is guaranteed on Capitol Hill, legislation eliminating tax penalties on the military during wartime looks like a good bet for early passage in both houses. Equally significant: It now appears likely that there will be an $8,000 tax credit available a year from now — at least for some purchasers. Which raises the question: Why not leave it in place for all first-time buyers?

There’s growing support for that on both sides of the Capitol, but there are also some complicating issues. In the Senate, the most outspoken advocate for months has been a Republican, Sen. Johnny Isakson of Georgia, a former real estate broker. He wants not only to extend the credit to Dec. 1, 2010, but to raise the maximum to $15,000, and make it available to all home buyers next year.

But recently, key Senate Democrats produced their own version of an extension, limited to six months, retaining the ceiling at $8,000 and targeting only first-time purchasers. The bill’s primary sponsor is Sen. Benjamin Cardin, D-Md. Democratic co-sponsors include Majority Leader Harry Reid of Nevada and Debbie Stabenow of Michigan. Republicans John Ensign of Nevada and Isakson have signed on as well.

In a statement, Cardin raised what may prove to be the crucial issue affecting the scope and duration of any credit extension: Cost. “A six-month extension is a fiscally responsible way to provide adequate time to nudge even more prospective home buyers off the sidelines,” he said.

Estimates of the revenue costs of the current credit vary widely, from $3 billion to $8 billion and up. How do you pay for any extension without worsening the budget deficit? The new Rangel bill includes the answer: You raise taxes somewhere else — you “pay as you go.” The Rangel bill pays for most of the servicemen’s credit extension by increasing IRS penalties on taxpayers who fail to file partnership or “S” corporation returns.

This would raise an estimated $327 million over the next 10 years. Where and how to raise taxes to cover the far larger cost of a six-month or 12-month extension of the current tax credit could prove much more controversial.

By Kenneth R. Harney

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

7 Tips for First-Time Home Buyers

Michael Carter - San Diego Real Estate Agent — Tue, 15 Sep 2009 02:23:13 +0000

A year after the financial collapse of 2008, the housing market is very different than it was before the foreclosure crisis.

Here are seven bits of wisdom from economists and financial planners for anyone contemplating a home purchase today:

Old-fashioned basics are more important than ever. The safest way to purchase a home is to put down 20 percent on a fixed-rate, 30-year (or less) mortgage.
Don’t become overconfident about income growth. Even though buyers in their 20s and 30s will likely see their incomes grow more quickly than previous generations, it is important to act sensibly when borrowing.
Anyone contemplating adding children to the family should calculate whether they could live on one income because having both halves of a couple work may turn out to be impractical.
Include a maintenance budget. Even new homes need upkeep and repairs.
Buyers who can’t afford their dream home now should opt for a starter home where they can save money each month for what they really want.
Consider a property that can be expanded and improved down the road when money is available.
No two buyers are the same, but they should all feel confident with the loan they enter into, no matter the size of the mortgage.

Source: The New York Times, Ron Lieber (09/12/2009)

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

Buyers Rush to Beat Tax Credit Deadline

Michael Carter - San Diego Real Estate Agent — Tue, 18 Aug 2009 01:59:35 +0000

Real estate professionals report that first-time home buyers are flooding the sale market, pressed to finalize a deal before the federal government’s $8,000 tax credit offer expires on Nov. 30.

Because mortgage approvals, residential inspections, and other steps in the buying process typically take about two months, buyers hoping to take advantage of the incentive will need to have a contract by the end of September.

The new flurry of activity now as house-hunters try to meet the deadline is triggering bidding wars and energizing the property market, which historically is slow at the end of summer. As a result, more homes are getting their full asking price.

Source: Chicago Tribune, Kathleen Lynn (08/14/09)

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

“The First Time Home buyers Tax Credit of $8000 can be now used as a down payment.”

Michael Carter - San Diego Real Estate Agent — Fri, 15 May 2009 02:15:27 +0000

Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, said that the Federal Housing Administration is going to permit its lenders to allow homeowners to use the $8,000 tax credit as a down payment.

Donovan’s remarks came in an address to several thousand Realtors® gathered this morning at The Real Estate Summit: Advancing the U.S. Economy, a special daylong session at the Realtors® Midyear Legislative Meetings & Trade Expo here.

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774