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Home Buyers Rush to Take Advantage of Tax Credit Before It’s Gone

by Alexandra Zega

Liv Mansfield is racing the clock, hoping to find and settle, or at least sign a purchase agreement, on a townhouse before the $6,500 tax credit for qualified repeat home buyers expires April 30, 2010.

While the credit is not as important as staying in the Wallingford school district, where her younger daughter will enter sixth grade next fall, Mansfield says it will help make expenses associated with the move ‘a wash.’ “It will help with moving costs, and with getting this house ready for sale,” said Mansfield, who has lived in the five-bedroom split-level Colonial she bought with her former husband nine years ago.

The house, which she says is far larger than what “two people and a small dog need,” will list for under $525,000 and heads for the market Feb. 15, 2010.

Current homeowners buying a house between Nov. 7, 2009, and April 30 and who have used the home being sold or vacated as a principal residence for five consecutive years within the last eight can qualify for the $6,500. It seems less is known about the repeat buyer credit. This incentive was added when the original $8,000 tax credit for qualified first-time buyers, which expired Nov. 30, was extended.

Houses purchased for $800,000 or less are eligible for repeat buyers. Single buyers with incomes up to $125,000 and married couples up to $225,000 may receive the maximum tax credit for both repeat and first-time purchases. The credit decreases for buyers who earn between $125,000 and $145,000 for single buyers and between $225,000 and $245,000 for home buyers filing jointly. The amount of the tax credit decreases as his/her income approaches the maximum limit. Buyers earning more than the maximum are not eligible for the credit. If a binding written contract to purchase is in effect April 30, the purchaser will have until July 1, 2010 to close.

The 2009 credit for first-timers helped jump-start the sagging home market in the summer and fall, data show. Walt Molony, a National Association of Realtors (NAR) spokesman, said two million existing-home sales in 2009 could be attributed to the $8,000 first-time buyer credit. Although it is too early to measure the credit’s effect on sales so far this year, Molony said NAR chief economist Lawrence Yun believes it will add 1.5 million sales to the tally.

The repeat-buyer credit was added to appease builders, who said the original did not offer enough time to purchasers of new houses, which take at least six months to build, to close on them. New homes accounted for only 7% of the tax-credit-based sales, Molony said.

The National Association of Homebuilders’ Donna Reichle said, “We hear builders saying they are getting inquiries, but that’s all so far. According to our economists, it’s way too early,” Reichle said. “If you look back at the passage of the original $8,000 credit and impact on housing starts, it took a couple of months, and that was in the spring as well.”

Moody’s chief economist Mark Zandi says the credit will boost sales “modestly,” however, by 300,000, with one-third trade-up buyers. “I don’t expect the credit to be extended again,” Zandi said. “Each time it is extended, it becomes less effective and thus more costly.”

David Krieger, senior vice president and general manager of Coldwell Banker Preferred in Philadelphia, says he believes that “a very large increase in our listing inventory in January is a result of the $6,500 credit.” Still, the $8,000 first-time credit remains the chief reason his company’s home sales were 33% higher last month than in January 2009, he said.

Typically, repeat buyers are better off financially than first-timers, so a lot of repeat buyers realize from the start they don’t qualify for the credit, Weichert Realtors agent Alec Schwartz said. “What they do realize, and what is getting more sellers to list, is that they understand that there are plenty of first-time buyers who qualify for the $8,000 credit out there, and they have a much better chance of selling their house and buying a new one than before,” said Schwartz, Liv Mansfield’s agent.

This is also true in the region’s new-home market, said Wayne Norris, regional sales manager for Hanley Wood Market Intelligence. “Builders have experienced increased activity in recent months” attributable to the $6,500 credit and “the fact that many potential buyers were able to sell their houses” to those taking advantage of the first-time buyer credit,” he said. The sense of urgency to make the tax-credit deadline and fears of rising interest rates will push new-home sales higher in the spring, Norris said.


(c) 2010, By Alan J. Heavens,The Philadelphia Inquirer.

Existing-Home Sales Surge in Most States in Fourth Quarter

by Alexandra Zega
Strong gains in existing-home sales were the predominant pattern in most states during the fourth quarter, with many more metro areas seeing prices rise from a year earlier, according to the latest survey by the National Association of Realtors®.

Sales increased from the third quarter in 48 states and the District of Columbia; 32 states saw double-digit gains. Year-over-year sales were higher in 49 states and D.C.; all but three states had double-digit annual increases.

Total state existing-home sales, including single-family and condo, jumped 13.9% to a seasonally adjusted annual rate of 6.03 million in the fourth quarter from 5.29 million in the third quarter, and are 27.2% above the 4.74 million-unit level in the fourth quarter of 2008. Distressed property accounted for 32% of fourth quarter transactions, down from 37% a year earlier.

Lawrence Yun, NAR chief economist, said the first-time home buyer tax credit was the dominant factor. “The surge in home sales was driven by buyers responding strongly to the tax credit combined with record low mortgage interest rates,” he said. “With inventory levels trending down over the past 18 months, we expect broadly balanced housing market conditions in much of the country by late spring with more areas showing higher prices.”

According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage fell to a record low 4.92% in the fourth quarter from 5.16% in the third quarter; it was 5.86% in the fourth quarter of 2008.

In the fourth quarter, 67 out of 151 metropolitan statistical areas reported higher median existing single-family home prices in comparison with the fourth quarter of 2008, including 16 with double-digit increases; one was unchanged and 84 metros had price declines. In the third quarter only 30 MSAs showed annual price increases and 123 areas were down.

The national median existing single-family price was $172,900, which is 4.1% below the fourth quarter of 2008; the median is where half sold for more and half sold for less. “This is the smallest price decline in over two years, with the most recent monthly data showing a broad stabilization in home prices,” Yun said.

“Because buyers are taking on long-term fixed rate mortgages, avoiding adjustable-rate products, and trying to stay well within their budgets, the price recovery process appears durable,” Yun said.

NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz., said near-term market conditions will remain favorable. “Mortgage interest rates are expected to trend up later this year, but right now we have very good conditions with steadying home prices and favorable inventory in most areas, especially in the higher price ranges,” she said.

“The biggest issue is for repeat buyers, who will have to accelerate their buying plans if they want the expanded tax credit. Since you must have a contract in place by the end of April, the best advice is to consult a Realtor now about qualification criteria and options in your area,” Golder said. Repeat buyers do not have to sell their existing home, but all buyers must occupy the property they purchase as a primary residence to qualify for the tax credit. Buyers who have a contract in place by April 30, 2010, have until June 30, 2010, to finalize the transaction to get a credit of up to $8,000 for first-time buyers and $6,500 for repeat buyers.

In the condo sector, metro area condominium and cooperative prices–covering changes in 54 metro areas–showed the national median existing-condo price was $177,300 in the fourth quarter, down 4.8% from the fourth quarter of 2008. Eleven metros showed increases in the median condo price from a year earlier and 43 areas had declines; in the third quarter only four metros experienced annual price gains.

Regionally, existing-home sales in the Northeast rose 11.1% in the fourth quarter to a pace of 1.03 million and are 33.6% higher than a year ago. The median existing single-family home price in the Northeast declined 5.6% to $234,900 in the fourth quarter from the same quarter in 2008, but with widely varying conditions. “In the Northeast, markets with lower median prices that have avoided wide swings, such as Buffalo, are generally showing consistent price gains,” Yun said. “Even so, some of the higher cost areas are showing signs of stabilization, such as Nassau-Suffolk, N.Y., and Boston.”

In the Midwest, existing-home sales jumped 14.5% in the fourth quarter to a pace of 1.38 million and are 29.9% above a year ago. The median existing single-family home price in the Midwest rose 1.1% to $141,100 in the fourth quarter from the same period in 2008, with the region accounting for the majority of metro areas experiencing double-digit gains.

Yun said markets with high unemployment rates in Ohio and Michigan experienced large price swings. “Big price gains in many Midwestern areas are due to a more normal range of home sales in contrast with predominately foreclosed sales a year ago,” he said.

In the South, existing-home sales rose 13.8% in the fourth quarter to an annual rate of 2.23 million and are 28.2% higher than the fourth quarter of 2008. The median existing single-family home price in the South was $153,000 in the fourth quarter, down 2.4% from a year earlier. “Affordable markets in the South that have relatively better local economies are seeing healthy price gains, such as Houston, Oklahoma City and Shreveport, La.,” Yun said.

Existing-home sales in the West jumped 16.2% in the fourth quarter to an annual rate of 1.38 million and are 18.2% above a year ago. The median existing single-family home price in the West was $227,200 in the fourth quarter, which is 8.9% below the fourth quarter of 2008, but with many areas showing notable gains.

“Markets in the West such as San Francisco, San Jose and Denver are showing double-digit price increases, and other markets like San Diego and Anaheim have begun to firm up,” Yun said.

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A national survey recently released by real estate leader Trulia shows that many Americans feel that President Barack Obama has not lived up to the hope he created during his campaign and his first 30 days in office. In Trulia’s latest American Dream survey conducted online on its behalf by Harris Interactive from January 19-21, 2009, President Barack Obama scored considerably lower marks on the topic of restoring the American dream of homeownership compared to a survey conducted February 20-24, 2009 after his first 30 days in office.

The current survey found that 37% of Americans gave President Obama a grade of “D” or “F” on the decisions he’s made towards restoring the American dream of homeownership compared to only 22% in the February 2009 survey.

Additionally, 54% gave him a grade of “A” or “B” in February 2009 compared to only 37% in January 2010. Despite these lower grades, and the troubles that have continued to plague the U.S. housing market, the survey found that the “American Dream” of homeownership continues to be alive and well with more than three out of four Americans considering owning a home as a part of achieving their personal American dream.

“I am thrilled to see that the American dream of homeownership is alive. If the dream had died we would be in a lot of trouble,” said Pete Flint, CEO and co-founder of Trulia. “Everyone realizes there is no easy fix and we have a long road ahead. Until there is a reversal in unemployment and the growing number of home foreclosures, the U.S. real estate market will continue to see significant volatility. I agree with the results of our survey that job creation and job security have to be the President’s top priority.”

President Obama’s Report Card
Democrats currently rate President Obama’s performance higher than Republicans, but both downgraded the President’s performance in the January 2010 survey compared to the survey Trulia conducted in February 2009. The current survey shows that “A” ratings from Democrats decreased by 19 percentage points and a 3 percentage point decrease from Republicans. Additionally, “F” ratings from Democrats increased by 3 percentage points and by 13 percentage points from Republicans.

Priorities Going Forward
Democrats and Republicans agree on the areas President Obama needs to focus on in 2010 to stabilize the U.S. real estate market. Creating jobs and job security continues to be at the top of the list with 62% of adults referencing it as a key priority for the President. With foreclosures reaching record levels in 2009 and expected to grow even more this year, it’s not surprising that 45% of adults included this as an important area of focus. Rounding out the top three priorities for President Obama is bringing/keeping low interest rates at 39%. Only 27% of Americans surveyed believe extending the home buying tax credit through the end of 2010 should be a key initiative to help stabilize the housing market.

This sentiment was also echoed on Trulia Voices Community, with many users feeling that President Obama tried to do too much, and that the key to fixing the economy and housing market will be to focus on creating new jobs and job security.

Positive and Negative Views
The majority of Americans surveyed were unaffected by the events that have transpired during the past year in the housing market, with 60% saying their view toward homeownership is unchanged. Slightly more of those surveyed have a more pessimistic than positive outlook with 21% saying they have at least a somewhat more negative view toward owning a home compared to 20% having at least a somewhat more positive view.

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