FAQ: Homebuyer Tax Credits

2 12 2009

USA TODAY published this article about homebuyer’s tax credit FAQ:

If you’re in the market for a home, the world is your oyster. Interest rates are at record lows. Housing prices in many parts of the country are still depressed. And you may be eligible for a generous tax break, even if the home you buy isn’t your first.

On Nov. 6, President Obama signed legislation that provides a $6,500 tax credit for some current homeowners who buy another home. The law also extends the $8,000 tax credit for first-time homebuyers, scheduled to expire Nov. 30, until next spring.

A lot of people are interested in taking advantage of this tax break, but the expanded credit also has whipped up a lot of confusion. Here are some answers to frequently asked questions:

Q: How do I qualify for the $6,500 credit?

A: This credit is available for homebuyers who sign a binding contract on a new or existing home by April 30, 2010, and settle by July 1 (deadlines that also apply to the first-time homebuyer credit). You must have lived in your existing home for five consecutive years out of the last eight. The home you purchase must be your primary residence. However, the law doesn’t require you to sell your old home, says Bob Meighan, vice president at TurboTax, the tax software provider. You can use it as a second home or a rental and still claim the credit, he says.

Q: I sold a home I had lived in for more than five years and bought a new one in August. Do I qualify for a tax credit?

A: No. For existing homeowners, the $6,500 credit is limited to homes purchased after Nov. 6.

Q: Does the home I buy have to be more expensive than the one I own now?

A: No. While the real estate industry is hopeful that homeowners will use this credit to buy a nicer place, there’s no prohibition against using it to downsize, Meighan says. That makes this credit particularly useful for seniors who are interested in moving into a smaller home.

If you are planning to move up, keep in mind that you can’t claim the credit if the purchase price of the home exceeds $800,000. Unlike some other tax credits, this one doesn’t slowly phase out once you exceed the threshold, Meighan says. If you buy a home for more than $800,000 – and that refers to the purchase price, not the assessed value or the amount of your mortgage – you are ineligible for the credit, period.

The $800,000 cap also applies to first-time homebuyers, but only those who purchase a home after Nov. 6. First-time homebuyers who bought a home for more than $800,000 between Jan. 1 and Nov. 6 can still claim the credit, assuming they meet the other criteria, Meighan says.

Q: I’m an existing homeowner, and would like to build a new home. Can I claim the credit?

A: Yes, but make sure your builder is good at meeting deadlines. You can claim the credit as long as you have a binding contract in place by April 30 and close by July 1. In the case of a new home, the closing date is the day you move in, Meighan says. If your home isn’t habitable by June 30, you won’t be able to claim the credit, he says.

Q: I bought a home in 2008 and claimed the old $7,500 first-time homebuyers credit, which must be repaid over 15 years. Did the new law change that rule?

A: No. That credit, which was available for homes purchased between April 9, 2008, and Dec. 31, 2008, must still be repaid.

The $8,000 first-time homebuyer credit, available for homes purchased after Dec. 31, 2008, doesn’t have to be repaid as long as you remain in the home for at least three years. Existing homeowners who qualify for the $6,500 credit don’t have to repay that money, either, as long as they meet the three-year requirement.

Q: We have a rental home and would like to sell it to our son, who has never owned a home. Would he qualify for the first-time homebuyer credit?

A: No. The legislation specifically prohibits taxpayers from claiming the credit if the sale is between “related parties,” Meighan says. A home sale to a parent, grandparent, child or grandchild would fall into that category.

Q: I sold my home this year and have been renting since. If I buy a new home, do I qualify for the expanded credit?

A: Yes, as long as you meet all of the other requirements, says Mel Schwarz, partner with Grant Thornton in Washington, D.C. The eight-year period used to determine eligibility ends on the day you buy your new home, he says.

NAR: Pending Home Sales Rise

2 12 2009

Pending home sales rose sharply in October, marking the ninth straight month of increases, according to the National Association of Realtors.

NAR’s pending home sales index tracks deals in which a contract has been signed but that has not gone through closing. An index of 100 equals the average level of contract activity in 2001.

October’s index was 114.1, up from 110 in September. It was 32 percent from October 2008, when it stood at 86.6.

The index for the Southeast was 115.4, up 5.4 percent from September and up 32 percent from a year ago.

Lawrence Yun, chief economist for NAR, said the increases reflect a market that is returning to normal.

“Keep in mind that housing has been underperforming over most of the past year,” said Yun. “Based on the demographics of our growing population, existing home sales should be in the range of 5.5 to 6 million annually, but we were well below the 5 million mark before the home buyer tax credit stimulus.”

Source:  National Association of Realtors

2 in 5 Jacksonville Mortgages Under Water

2 12 2009

Nearly 41 percent of all Jacksonville mortgages, or 135,730, were under water as of September, according to First American CoreLogic.

Jacksonville’s rate of homeowners with negative equity, or those who owe more on their mortgage than their house is worth, is much higher than the 23 percent national average, but below the 45 percent of homeowners under water in Florida.

The sunshine state had the third highest percentage of homes under water. Nevada ranked first with 65 percent and Arizona second with 48 percent.

Of the 4.5 million mortgages in Florida, nearly half were under water, and another 180,178 were nearly under water in the third quarter.

Nationwide, nearly 10.7 million or 23 percent of all residential properties with mortgages were in negative equity as of September. Another 23 million were approaching negative equity.

Combined, Florida and California accounted for 4.4 million or 42 percent of all negative equity loans, the report found.

CoreLogic said its data is based on a “proprietary model” that factors in loan amortization and utilization rates for home equity lines of credit, which it claims provides a more precise view of underwater borrowers.

Soure: Jacksonville Business Journal

October Home Sales Up, Prices Down in Jacksonville

2 12 2009

Sales of existing homes in October were up in Jacksonville and across the state, but the median price of those homes continued to decline.

Sales in Jacksonville were up 44 percent, and the median sale price of $147,200 was down 13 percent. The local numbers do not include data from the St. Augustine-St. Johns County Board of Realtors.

The Jacksonville numbers were almost identical to the statewide figures. Across Florida sales were up 45 percent, and each of the 20 markets tracked by Florida Realtors (formerly the Florida Association of Realtors) saw an increase. The median sales price statewide fell 17 percent to $140,300. It was the 14th consecutive month home sales rose in the state.

According to the National Association of Realtors’ latest industry outlook, the housing market is continuing its positive momentum.

“We’re getting early indications of price stabilization, but we need a steady supply of qualified buyers to meaningfully bring inventories down and return us to a period of normal, steady price growth,” said NAR Chief Economist Lawrence Yun. “That, in turn, would help fully remove consumer fears, which would then revive the broader economy.”

Sales of existing condominiums more than doubled in the Jacksonville market, but the median price fell 41 percent to $92,500. Sales statewide were up 82 percent, but the median price of $105,200 was down 29 percent.

New U.S. Home Sales Rose 6.2% in Oct.

2 12 2009

Sales of new U.S. homes rose last month to the highest level in more than a year as the housing market shows stability after its historic collapse.

Sales of new, single-family homes were at a seasonally adjusted annual rate of 430,000, according to the U.S. Census Bureau and the Department of Housing and Urban Development. That is 6.2 percent above the revised September rate of 405,000 and 5.1 percent higher than October of last year.

The government also says the median sales price of new houses sold in October was $212,200. The number of new houses listed for sale at the end of the month was 239,000, a 6.7 month supply at the current sales rate.

The government report on new home sales follows a report from the National Association of Realtors last week showing existing home sales rose 10.1 percent in October from September levels.

Existing home sales, by far the lion’s share of the housing market, were up 23.5 percent from a year earlier, with sales activity at the highest pace since February 2007, the NAR said.

Home sales in Jacksonville, as reported last week by Florida Realtors, were up, but the median price was down.

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