InvestorLoft Real Estate Investing Blog

The first time home buyer tax credit has had an effect on the market, but clearly not to the extent or where the government intended.

Affordability due to lack of home buyers and general market softness has continued to make desirable cash flowing properties in well located markets accessible to investors and they have bought extensively.  Notice the most dynamic markets in the run up through 2007 (per sample below)  now trend to oversold.

Fewer home buyers have been able to qualify for owner occupied loans and fewer loans have be processed due to the banks being unable to deal with the origination volume, short sale requests, modification and REO disposition loads. They are essentially drinking from a fire hose using the same “tin cup” they went to The Feds with, and as a result cannot immediately meet new or existing loan servicing demands.

The silver lining in this for the economy is that the fear of a deluge of REOs hitting the market in a short period of time is unlikely as it would trash values. This would not help the banks, sellers or Realtors©.

Fear subdues price appreciation which is good for investors who are out buying en masse. This should keep investment grade properties available for at least the next two quarters, however well sited rental properties in cash flow ranges in good markets are getting harder and harder to find as inventories in these great price ranges ($50K to $200K)  and great locations are all most depleted. This was not in the Fed plan.  Surprise: their national solution ignores local market dynamics.

The other unintended consequences of this current Federal government largesse and push to retrofit residential real estate for energy efficiency, is that the low hanging beneficiaries of these grants, incentives and rebates are real estate investors as they can recapture capital and monetize these strategies to quite unimagined, yet legitimate ends.

This inventory data and our knowledge of How to Get Maximum Performance from Your Investment Properties indicate we are in a great market and maybe a golden age for investors who know what they are doing.

Below are some high level market statistics for property value trends and inventory levels in major metropolitan areas across the country. You can follow the link in the bottom of the table to your local MLS inventory trends.

For more information on how to find and leverage an inexpensive by high return retrofit strategy, call NEXZUS at 602-241-0800. We have realized significant CAPX and CAPX recovery, OPX appraisal and rental premium improvements many of which are undiscovered by investors.

Article Courtesy of:
Andrew Waite,
Publisher
NEXZUS Publishing Group / Personal Real Estate Investor Magazine

Get your subscription to Americas best selling real estate investing magazine

—————————————-

Purchasers now have until September 30 to complete transactions on contracts signed by April 30.

Late Wednesday June 30th the senate approved the measure just hours ahead of the original June 30th deadline, and only one day after House of Representatives approval of the measure.

On Friday July 2nd President Barack Obama signed off on HR 5623, otherwise known as “The Homebuyer Assistance and Improvement Act of 2010”. This extends of the expiration date for the federal home buyer tax credit from June 30th 2010 an extra 3 months to September 30th 2010.The legislation will create a seamless extension even though the bill was signed into law a few days after the original expiration date.

This bill doesn’t help anyone currently shopping for a home. Buyers must have signed a contract by April 30 to qualify for the tax break, now first-time homebuyers will have until Sept. 30 to close on their purchases and receive an $8,000 tax credit.

Qualified existing homeowners (purchasing a replacement primary residence) also have until Sept. 30 to close on new homes and receive a tax credit of up to $6,500.

As many as 180,000 people with pending contracts breathe a sigh of relief as the tax credit extension rushes through in the final hours. The National Association of Realtors (NAR) lobbied for the extension – citing a large influx of buyers trying to take advantage of the tax credit had overwhelmed mortgage lenders trying to process loans in time, and also to compensate for complicated short sale transactions which can sometimes take months to complete.

$8,000 First-time Home Buyer Tax Credit Summary

• A first-time home buyer is someone who has not owned a principal residence during the three-year period prior to the purchase.
• Qualifying primary residences include: single-family homes, condos, townhomes, and co-ops
• The tax credit does not have to be repaid unless the home is sold or ceases to be used as the buyer’s principal residence within three years after the initial purchase.
• The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
• The tax credit applies only to homes priced at $800,000 or less.
• The tax credit now applies to sales occurring on or after January 1, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by September 30, 2010 will qualify.
• For homes purchased on or after January 1, 2009 and on or before November 6, 2009, the income limits are $75,000 for single taxpayers and $150,000 for married couples filing jointly.
• For homes purchased after November 6, 2009 and on or before April 30, 2010, single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.

The $6,500 Move-Up / Repeat Home Buyer Tax Credit Summary

• To be eligible to claim the tax credit, buyers must have owned and lived in their previous home for five consecutive years out of the last eight years.
• The tax credit does not have to be repaid unless the home is sold or ceases to be used as the buyer’s principal residence within three years after the initial purchase.
• Qualifying primary residences include: single-family homes, condos, townhomes, and co-ops
• The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $6,500.
• The tax credit applies only to homes priced at $800,000 or less.
• The credit is available for homes purchased after November 6, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, the home purchase qualifies provided it is completed by September 30, 2010.
• Single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.

We thought it was important to note the great strides that NAR has taken in actively engaging with the government on housing-related issues. The past four months have been wrought with challenges, yet the diligence of the NAR has paid off as the U.S. government has implemented their recommendations to stimulate housing with the signing of the American Recovery and Reinvestment Act of 2009.

For more information, read-up on NAR’s views on Unlocking America’s Economy.