2009 First Time Homebuyer Credit

As a means of stimulating the economy and the housing market, Congress has enacted legislation that grants a tax credit of up to $8000 to first-time homebuyers. This credit is available to buyers who have not owned a residence during the last three years. To qualify for the credit, the home being purchased must be a primary residence (meaning the buyers will live in the home). The amount of the credit will depend on the value of the property (the credit is equal to 10% of the purchase price up to $8000) and the buyer’s income. The maximum credit is available to buyers whose income is up to $75,000 for a single buyer or up to $150,000 for married couples. There is some hope that Congress will extend the credit, but unless that happens, the credit expires on Dec. 1st, 2009. To qualify the home purchase must be completed prior to that date. With escrow periods of 45 days (on average) that means we may see the market affected in the next two weeks.

(Remember a tax credit is an item that reduces your actual tax. It differs from a tax deduction that reduces your taxable income.)

For a more in-depth explanation of the tax credit click here

Short Sales

It is no surprise to you that in today’s marketplace we are seeing properties with a market value less than the amount due on the mortgage(s). This is called being ‘upside down’ or ‘underwater’. If a seller in this position needs to sell for any reason, the sale may become a ‘short sale’. In a short sale the seller will try to avoid foreclosure by listing the property for sale, continuing to make payments, if possible, and upon receipt of an offer hope the lender will accept and approve the negotiated price.

The advantage to the seller is the avoidance of foreclosure, the off-loading of the property and mortgage(s) and the hope of less damage to their credit rating. The tough sell here is getting the lender to accept the short sale price. There may be a 1st mortgage or a 1st and a 2nd. The loan(s) may have been securitized, meaning they were bundled together and sold to investors. That makes for a lot of involved parties. And most, if not all of them, are being asked to accept a reduced payoff and absorb the loss. Many 2nd mortgage lenders are being asked to accept short sell prices that mean no payoff on their investment.

The disadvantage to the seller (and the buyer) is the waiting period. After a buyer and seller negotiate a price and the house is taken off the market as an active listing, the wait begins. This wait can take several months as lenders and investors review the offer. This waiting period cools off many buyers on looking at short sales. Investors can be more accepting of this lengthy period, but a homebuyer looking to move, maybe having sold his previous residence often lacks the patience for this type of game.

Perhaps an REO is the way to go. I will discuss REO (foreclosures) next month.

(As of this writing there are 70 single family homes in Santa Rosa that are listed as short sales. To view a complete list send me an email at tenret@sonic.net.)

Sonoma County Stats

August prices were down in Sonoma County 0.3% from July 2009 for single family homes, but up for condos by 4.1%. Sales were down for both with a total of 1335 sales in August.

Many buyers have noticed a lack in inventory on the market in the range of $200,000 to $500,000. According to the California Association of Realtors the inventory of unsold properties went from 6.6 months in January 2009 to 3.9 months in July 2009.

If you love numbers and graphs click here to see the local public MLS data.