The American Recovery and Reinvestment Act of 2009 authorized the tax credit, which provides up to $8,000 for qualified first-time homebuyers who close on a home from January 1 through December 1. Many homebuyers are able to take advantage of the credit.
The tax credit can be used by anyone who has not owned a home in three years and makes less than $75,000, for those who are single, or $150,000 for couples.
It provides a credit on 10 percent of the purchase price, up to $8,000. People will get it back on their taxes next year, which doesn’t help with direct costs, but the money does come back.
Alma Feil, HAPO COmmunity Credit Union’s mortgage director, said although HAPO’s mortgage department has seen an increase in loans, there’s a lot of confusion about the program and many first-time homebuyers don’t even know about it.
“A lot of people think it’s an upfront rebate and they don’t know that you get the credit after you buy the home,” she said. Feil said about 40 percent of the home sales are to first-time buyers.
Sales in the Tri-City home market from January through May of 2009 were down 18 percent, year-over-year and the number of homes under contract dropped 11 percent, according to the statistics from the Tri-City Association of Realtors. But area real estate professionals aren’t complaining.
“If this was 2001-2002, we would think it was a record year,” said Paul Roy, vice president of the Tri-City Association of Realtors.
Roy said the tax credit has made it more attractive to buy, especially for those who were already considerng a new home, but he doesn’t believe it is attracting buyers to the market.
“It’s an incentive, but I don’t think anyone makes an investment to move based on an incentive,” said Roy.
Roy said the Tri-Cities real estate market is in a very “interesting” place right now.
There’s new residents moving in looking for homes to buy, but inventory is tight, especially in the $300,00 home market and under.
May’s monthly inventory of available homes was 989, a 21 percent drop from May 2008 and the lowest inventory in more than five years.
“The buyers don’t have a lot of choices,” he said. “Houses that are hitting the market in the under $300,000 mark are selling quickly.” And banks aren’t doing a lot of lending for spec homes.
“If we could go back in time and builders could get loans to build, we’d be screaming,” said Roy. “We just don’t have a lot of choices for buyers.”
Source: Journal of Business