Archive for December, 2008

If you are a first time home buyer (defined as someone who hasn’t owned a principle residence in the past 3 years) and you bought a home on or after April 9, 2008 you may qualify for up to a $7500 tax credit.

There ARE a few conditions and caveats. The tax credit is refundable, which means you have to pay it back. So it’s more like an interest free loan that gets paid back over the next 15 years starting for the 2010 tax year for houses bought in 2008, 2011 for homes bought in 2009. Houses must be bought between April 9, 2008 and July 1, 2009.

The amount of the tax credit is dependent on the price of the house – 10% of the cost of the home with a maximum credit of $7,500. And there are income restrictions which are explained quite thoroughly in the link below.

All in all, it’s worth looking into and worth discussing with your accountant. If you’re thinking about buying a house, but not quite sure if this is the right time, this is something else to consider along with low housing prices and low interest rates.

Click here for more details about the first time homebuyer tax credit

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I heard from a lender I work with at National City- interest rates are down! Yeah! Right now you can get a conventional mortgage with no point for 5.5% (with good credit of course). FHA rates run about a quarter per cent higher. Great time to buy- prices are down. Rates are down. And a lot to choose from!

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If I had a crystal ball and could tell you exactly when prices were going to bottom out, I would be wealthy. The best I can do is compile stats and keep up to date on changes in the industry. We all know that home prices have been dropping drastically. For example, there were a few more sales in Clarkston/Independence Township for the first 10 months of this year compared to the same time period last year, but the median sales price was 19.2% lower this year. It was also 31% lower than the median sales price for 2005 (year ending stats). For a detailed chart click here.

One of the main reasons for this sharp decline in prices is the heavy inventory of foreclosure listings on the market. The banks typically price their listings to sell quickly. If they don’t sell- they lower the price. And keep lowering it until it sells. When the foreclosure market dries up, prices should start to stabilize and eventually increase again. Though I doubt they will increase as quickly as they had in the past. The 90’s and early 2000’s were great for Realtors and sellers.

Today is great for buyers. But for how much longer? The banks have been taking a bath on these foreclosed homes for quite a while, and now it seems they are finally going to do something to avoid taking homes back. It is expensive to foreclose on a home, so now some of the bigger banks are starting to work with home owners to try to keep them in their homes.

Citigroup has announced recently that they will be reaching out to 500,000 non-delinquent borrowers over the next six months to see if they are struggling and to offer to modify their mortgages to keep them from falling behind.

JPMorgan Chase & Co. and Bank of America Corp. have also become more aggressive in modifying loan agreements in the face of mounting defaults and plunging home values.

Then today I read that the government is considering using over $24 billion of the $700 billion of bail out moneys to modify loans. They figure this could prevent 1.5 million foreclosures.

IF these programs work, we could see the foreclosure market dry up. This is good for sellers and great for the economy in general. But if you are waiting for the market to hit bottom, we may be there. One other thing to consider- right now, interest rates are GREAT. But there will be more about that in my next post.

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