I was
recently interviewed for the Washington Examiner newspaper about the extension of the tax credit of home
buyers – here is a synopsis of our discussion:

The
extension of the home buyer tax credit will definitely spur housing sales and
here’s why.  It brings into play move up buyers as well as extends the
first time buyer credit.  On the move up buyer side, you have to have
owned and lived in your principal residence 5 consecutive years out of the last
8 years to qualify but it will bring “new” buyers into our market place. 
Over the last year, we have seen little move up buyers as a result of lost
equity; uncertainty of perceived value in the market as a result of
foreclosures and short sales, and consumer confidence has been low because of
reports on unemployment and news on the recession.  Therefore, our market
has been primarily first time buyers and investors with a few relocation buyers
and even fewer move up buyers thrown into the mix.  It is a matter of
education on the REALTOR’s part as well as the media to get the word out on to
our move up market on what an advantage this is to them and why they should
jump on this tax credit.  We have a perfect storm for buying real estate
right now – the tax credit, historically low rates, and prices are affordable
in many areas – especially in the move up buyer price range.  There are a
few restrictions that apply but not many.  The purchase of the new home
must be a principal residence that would qualify for the capital gain tax
exclusion of $250,000 for singles and $500,000 for married people
definition;  the purchaser’s income cannot exceed $125,000 for individuals
and $225,000 for a couple filing jointly on their tax returns; the home’s
purchase price cannot exceed $800,000 and the tax credit is equal to 10% of the
purchase price up to $6,500; you cannot purchase the new residence from a
family member;  the tax may have to be repaid if you sell the acquired
property or cease to use it as your principal residence in less than three
years of acquiring the property; and lastly, it is for contracts written
between November 9, 2009 and April 30, 2010 that must close by June 30,
2010.  The contract and settlement dates will also help builders or people
who wish to build on land they already own if people react quickly as most
builders don’t have inventory/spec houses available and the typical timeframe
to build locally is 4 – 6 months.

The
extension of the first time buyer tax credit has been modified slightly but it
is for the better.  The main difference of the previous tax credit and the
new one is the income qualifications – they have been increased to $125,000 for
singles and $225,000 for married couples.  The tax credit is 10% of the
purchase price up to $8,000 so it applies to homes purchased up to
$800,000.  The tax credit applies to homes that are purchased between
January 1, 2009 and April 30, 2010 and they too must settle by June 30,
2010.  There is no repayment of the credit unless you sell with three years
or cease to use the property as your principal residence within the three year
time frame.  If you purchase in DC, you can only use the tax credit and
cannot piggy back the with the District’s first time buyer tax credit –
sorry!  As a clarification, a first time buyer is anyone – including
spouses – who have not owned a principal residence in the previous 3 years.

In both
instances, buyers may claim their credit on their tax returns by filling out
IRS form 5405 and documenting the appropriate deductible amount on line 69 of
the 1040 for 2009 tax returns or line 67 for 2008 tax returns.  They must
also provide a copy of the HUD – 1 form proving the completed purchase within
the appropriate timeframes allotted by the guidelines.  Additionally, the
homes purchased must be a principal residence and do not apply to investment
properties or second homes.

Today,
our biggest challenge is inventory.  As an example, inventory levels of
existing homes are down 57% from the same week last year in Northern
Virginia.  Our inventory levels are at April/May of 2005
levels– lots of buyers and not many homes to choose from make buying a home
tough in today’s market.  The reasons for the number of buyers in the
market match the aforementioned perfect storm for home buying – the tax credit,
low rates, and affordable housing prices.  We expect the credit to
continue to encourage buyers to enter the housing market through the extension
dates, then the typical spring market should take hold and the housing industry
will help carry us further out of the recession if conditions remain
stable.  There are questions lurking on the horizon in the housing market
that question stability – not everything may be so rosy.  The uncertainty
is over; rate constancy after the government purchasing of mortgage backed
securities ends at the end of March, 2010 and housing prices being suppressed
by the implementation of the HVCC and lastly, the effect of foreclosures moving
forward on housing prices.

It is our
job to get the word out and help our clients take advantage of this
unprecedented opportunity.  Get it?  Got it? 
Good!

Now, go
sell something!