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Home Buyer Tax Credits

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$8,000 First-time Home Buyer Tax Credit at a Glance

The $8,000 tax credit is for first-time home buyers only. For the tax credit program, the IRS defines a first-time home buyer as someone who has not owned a principal residence during the three-year period prior to the purchase.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 June 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 at a Glance

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.

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 June 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.

For more information on the Homebuyer Tax Credit, go to: http://www.federalhousingtaxcredit.com/faq2.php#1

or contact:

Brian Quiqley

The Mortgage Network

720-949-5630

loans@brianquigley.com

Residential Housing

2/23/2010

While home prices have recently risen, as noted by S&P/Case-Shiller, others site three reasons for home prices to head lower: a coming wave of foreclosures, rising interest rates and the eventual end of the tax credits.

There are nearly 5 million houses and condos now delinquent on their mortgages and likely to go through foreclosure in the coming months. This represents more than half of the 7.7 million households now behind on their mortgage. However, John Burns, CEO of John Burns Real Estate Consulting Inc, concludes that there is strong investor demand for these properties, and with continued low interest rates and recovering employment, these sales won’t have much impact on overall home prices.

The S&P composite index of 20 metropolitan areas shows signs that home prices stagnated in December and a recent Reuter housing poll of economists said the bottom had probably been reached but prices were unlikely to gain this year.

Brian Wesbury, chief economist at First Trust Advisors said that if Americans don't start focusing on building new houses, the market will have a much bigger problem on its hands...short supply.

"We need one and a half million houses per year just to keep up with population growth...And then if you throw in, you know, fires and tear-downs and just worn-out properties, we need 1.6 million or more per year. Right now, we're down to about six and a half, seven months' inventory weather you look at new homes or existing homes." Wesbury said.

Existing Home Sales

11/30/2009

October's Existing Home Sales rose by 10.1% to 6.01M, considerably higher than market exceptions for a smaller increase to 5.70M. This is the highest level since February 2007. Home re-sales are now 23.5% above their year ago level.

Inventory of Homes Available for Sale fell by 3.7% to 3,574K, which is 14.9% below its year ago level. This reduced the months supply to 7.0, its lowest level since February 2007. Now eyes are turning to the "shadow" inventory of homes available for sale, both from homeowners and financial institutions temporarily holding foreclosed homes off the market because of low prices.

Home Prices - Economist Steven A. Wood says that "Over the past year, average prices have fallen by 5.0% while median prices have tumbled by 7.1%. Year-on-year prices have declined in 38 of the last 39 months and are still falling moderately, partly reflecting a shift in the composition of sales to lower priced homes and partly reflecting the much lower prices associated with distressed sales."

A CLOSE LOOK AT EXISTING HOME SALES

10/27/2009

Existing Home Sales ROSE by 9.4% in September to 5.57 million, compared with market expectations for a smaller increase to 5.35 million.

- This increase has lifted sales to their highest level since July 2007.

- Over the past year, existing home sales have increased by 9.2%. However, this is 23.2% below their September 2005 record high.

- About 45% of sales were estimated to be to first-time home buyers, spurred by low prices and the home buying tax credit from the government.

- About one-third of sales were estimated to be distressed.

The Inventory of Homes Available for Sale FELL by 7.5% to 3,630k. With this decline, the inventory of homes available for sale is now 15.0% below its year ago level. This reduced the months supply to 7.8, its lowest level in since March 2007. This is supply is significantly lower for relatively low priced homes and substantially higher for relatively high priced homes. However, there appears to be a large "shadow" inventory of homes available for sale, both from homeowners who have kept their homes off the market because of low prices and from financial institutions temporarily holding foreclosed homes off the market.

Home Prices continued to decline compared to their year ago levels. Over the past year, average prices have fallen by 6.5% while median prices have tumbled by 8.5%. Year-on-year prices have declined in 37 of the last 38 months and are still falling moderately, partly reflecting a shift in the composition of sales to lower priced homes and partly reflecting the much lower prices associated with distressed sales.

Bottom Line: Existing home sales peaked during the summer of 2005 and fell steadily through November 2008.

- Since then, there has been a moderate recovery in sales.

- However, a significant number of the sales are of distressed properties, which is depressing home prices.

- The inventory of homes available for sale has fallen substantially over the past year and is now only modestly above "normal" levels.

- Anecdotal evidence suggests a substantial ‘shadow’ inventory that would come onto the market if sales (and especially prices) were to pick up.

- Home prices have been falling on a year-on-year basis for 3 years but there is some evidence that the pace of decline is beginning to slow.

Excerpts from a 10/23/09 Existing Home Sales report by Steven A. Wood, Chief Economist of Insight Economics.

10/12/2009

The "Cramdown"

With midterm elections just 12 months away, Congress is once again preparing to answer the continuing foreclosure crisis by resurrecting the Cramdown, which allows bankruptcy judges to adjust the terms of home loans to give borrowers relief.

Moody's Economy.com estimates that 3.8 million homes will enter foreclosure this year, up 41% from 2008.

ATTEMPTING A JUMPSTART One bill sponsored by Senator Jack Reed (D-RI) and co-sponsored by Jeff Merkley (D-OR) and others would:

1. Force lenders to pause before they foreclose and require them to offer a break on their mortgage terms if they qualify for help under the Treasure program.

2. Grant states $6.4B to help homeowners keep their homes.

Another proposal reportedly being drafted by House Financial Services Committee Chairman Barney Frank (D-MA) would temporary suspend home-loan payments or provide mortgage subsidies for unemployed homeowners.

The Administration is also floating new options:

1. Extend the homebuyer's tax credit, making it easier for Fannie Mae and Freddie Mac to finance mortgages.

2. Earmark funds for state housing agencies and independent mortgage bank programs.

3. Provide subsidies to mortgage servicers who agree to rework loans.

Many congressional Democrats, including Senator Richard J. Durbin (D-IL), hold to the notion that banks and mortgage servicers will do their best to avoid cutting principal or interest rates on a mortgage. They believe these institutions will need to hurt more before they willingly take more losses. This group of critics is calling for another "nuclear option": The Cramdown. The last on proposal sailed through the House but stalled in the Senate. If Durbin's bill were to pass, a judge could reduce the interest rate, reduce the principal or extend the term on home loans payments - something bankruptcy courts can already do with most other kinds of debt.

Market Statistics

2008

The Denver real estate market is going through an interesting time. While the local media talks of the high foreclosure rates in some areas, overall, the market fundamentals are good. The market for 'detached' homes continues it's long term strength and stability vs. attached homes.

We keep hearing about all the doom and gloom in the real estate markets and while there are parts of the country that are experiencing this, let’s look at what’s happening where it matters most – here in Denver. The home builders certainly are suffering after many boom years. Residential building permits (single family) are down about a third since 2000. If they stay low and continue the downward trend this bodes well for resales because their overall value goes up. Why? New home builders are typically slow to respond to the fluctuating real estate market. Because the Denver economy is still better than the rest of the nation and continues to grow, creating more demand for housing and we will see a shortage of homes – an example of supply and demand. The builders will eventually respond and begin building up again, but for now they’re still downsizing.

Looking at the foreclosures in the metro Denver area, we see a steady increase since 2001 to a high in 2007. 2008 will still be high but we will start to see a downward trend in the next year or so. This can be supported by the statistics about the foreclosure loans. We can see that the average loan value on a foreclosure was about $200K, which is less than the average home price in the Denver metro area. Many of these loans were to people who really wouldn’t have qualified for a loan and the ARM’s they signed up for made it more

lucrative–for a while! Most of the loans currently foreclosing originated in 2004 and on average were foreclosed in about 2 ¾ years. Based on the number of these loans in successive years and the result of the mortgage industry tightening the guidelines we will see this downward trend in foreclosures.

So what is the Denver real estate market looking like? Pretty boring compared to the rest of the country. Between 2000 and 2006 home prices in the US have risen the fastest in history. Denver’s has kept up with that pace, not as rapidly but with slightly stronger prices. If you look at other parts of the country, Florida, Nevada and Arizona are seeing dramatic depreciation in their home values because their’s appreciated in past years at a frenzied rate. These are the areas we see most of the time on the news! Since 2006 we have essentially flattened out. A by product of this is that people are waiting to sell their homes because after the cost of selling a home, many cannot recoup their equity since the prices are flat.

The volume of home sales in the Denver metro area show our strongest year ever in 2004. Going back to our foreclosure facts we see that this is the year when most of the foreclosed loans originated. We flatten out in sales volume from there on out, but remember that new home sales are on the decline so that means that re-sales are on the rise. Because many homeowners are hesitant to sell their homes unless they have to, the volume is made up by the great deals on the market in foreclosures.

Since every neighborhood is different just call me to discuss your particular situation. I can provide a comparative market analysis to help in your next transaction.

Pete Nemeth - Mark Wilson
CP Advisors Real Estate
(303) 358 8901 (303)435-3012
info@dnvrfp.com