Joe Knows Mortgages

 Brevard County Mortgage and Real Estate Market Data For January 2010 

       Welcome to the first market data report for Brevard County Real Estate of 2010.  While 2009 turned out to be a good year for both the reduction in inventory, and sales of existing inventory, it also proved to be the year of lending changes, and bottoming out prices.  With 2009 in the distant past, we now get our first glimpse into the new decade for 2010. 

        Not too surprising, the vast majority of sales were under $200,000 with 76% of all residential transaction selling between $0 and $199,999.  This trend has been consistent over the past year as the first time homebuyers are greatly incentivized to come in and purchase.  However, we did see an increase in the average price sold of homes to $160,079 in January 2010 versus $148,474 in January 2009.  This data could be telling us that we have hit bottom, and are going up. 

        The biggest surprise for January is the sheer number of cash transactions that are taking place.  This January 2010 we had 252 cash Transaction which accounted for 52% of the market.  Again, Real Estate has historically been a decent investment, and with so few places to put your money right now, buyers are choosing to use their cash instead of financing.  When the cash on the sidelines starts coming into the game at this pace, that is a sign that we have hit bottom. 

        Whether or not the Brevard County market has hit its bottom or not, one thing is certain: it is an outstanding time to buy real estate.  If you are a first time homebuyer, the government is still offering the $8000 tax credit, however, there is an end date, so you better act soon to find your home and claim your government incentive.  Also, we know that the federal government will stop their Mortgage Backed Security purchase program which will almost instantly add to the increase of interest rates.  So, if you are on the fence, or if you know someone who is thinking about buying, now is the time to act.  If you have any questions, please contact me.

Let me make a statement, and I hope you truly digest what I am about to say: the interest rates on mortgages here in Brevard County, Florida are about 1/8% off of their lowest levels in history.  That means that if you qualify for a mortgage, you could potentially get a better rate on your loan than just about anyone in history.  With interest rates and home prices as low as they are, and with the first time home buyer tax credit extended into 2010, people should be lining up to buy homes.  However, these rates have only one way to go, and we are headed there soon.

One of the biggest factors in our low rates right now is not the Fed’s decision to keep the overnight rate as low as it is, rather it is from their decision to continue to purchase mortgage backed securities in the many Billions of dollars per week.  When this purchase program ends, the demand for Mortgage Backed Securities will be less, therefore the price will decrease, and the yield (or interest rate) will increase. 

Another factor that is keeping rates low, has been the low threat of inflation.  While inflation is not happening right now, there are many concerns of inflation coming once the economy starts to improve.  We are already seeing signs of inflation as the Core CPI (Consumer Price Index) came in higher than expected, and a little higher than this time last year. It is inevitable that when you dump as much into the economy as we have, and when the cost of money is as low as it is that we will see inflation.  In inflationary times, bonds are not as attractive because they become devalued. 

So, with Inflation around the corner, and the Fed finishing their Mortgage Backed security purchasing program coming to an end in 2010, interest rates are going to increase.  The increase in interest rates will affect buyer’s purchasing power, as well as their cost of money.  I have said it before, and I will say it again: Now is the time to buy!  Rates are low, but rising; home prices are down, but will go up; sellers are generous, but they will be greedy.  Please take advantage of this opportunity, before it goes away. If you are currently renting, talk to a professional to see if you can buy; if you know someone who is renting, encourage them to see if they can buy.

First Time Homebuyer Tax Credit Extended Into 2010!
Plus…A New Tax Credit for Certain Existing Home Owners!

It’s official. President Obama has signed a bill that extends the tax credit for first-time homebuyers (FTHBs) into the first half of 2010. This program had been scheduled to expire on November 30, 2009.

In addition to extending the tax credit of up to $8,000 through June 30, 2010, the extension measure also opens up opportunities for others who are not buying a home for the first time.

So Who Gets What?
The program that has existed for FTHBs remains intact with the one exception that more people are now eligible based on an increase in the amount of income someone may now earn.

Additionally, the program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Deadlines
In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

Higher Income Caps in Effect
The amount of income someone can earn and qualify for the full amount of the credit has been increased.

Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible.

Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

Maximum Purchase Price
Qualifying buyers may purchase a property with a maximum sales price of $800,000.

First-Time Homebuyer Tax Credit “ Frequently Asked Questions
Here are answers to some commonly asked questions about the tax credit.

What is a tax credit?
A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual’s primary residence.

What is the tax credit for first-time homebuyers (FTHBs)?
An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.

Who is eligible for the FTHB tax credit?
Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible. This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.

As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.

How do I claim the credit?
For those taking advantage of the tax credit in 2009, you may choose to either apply for the credit with your 2009 tax return or you may apply for the credit sooner by filing an amended 2008 tax return with Form 5405 (http://www.irs.gov/pub/irs-pdf/f5405.pdf).

Can you claim the tax credit in advance of purchasing a property?
No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.

Can a taxpayer claim a credit if the property is purchased from a seller with seller financing and the seller retains title to the property?
Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Examples of this would include a land contract, contract for deed, etc. According to the IRS, factors that would demonstrate the ownership of the property would include: 1. the right of possession, 2. the right to obtain legal title upon full payment of the purchase price, 3. the right to construct improvements, 4. the obligation to pay property taxes, 5. the risk of loss, 6. the responsibility to insure the property and 7. the duty to maintain the property.

Are there other restrictions to taking the credit?
Yes. According to the IRS, if any of the following describe your situation, a credit would not be due.

• You buy your home from a close relative. This includes your spouse, parent, grandparent, child or grandchild.
• You do not use the home as your principal residence.
• You sell your home before the end of the year.
• You are a nonresident alien.
• You are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This does not apply for a home purchased in 2009.)
• Your home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)
• You owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2009, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2006, through July 1, 2009.

Can you buy a home from a step-relative and be eligible for the credit?
Yes. Provided the person you are buying a home from is not a direct blood relative, the purchase would be allowed.

Can parent(s) who will not live in the property cosign for a mortgage for their child and the child that is a qualifying FTHB still be eligible for the credit?
Yes.

Can a separated spouse who has not owned a home for four years qualify for the FTHB tax credit if the spouse has owned a property anytime in the last three years?
No. However, the spouse may be eligible for the repeat buyer credit. The best path to take in any situation regarding income taxes is to speak with a professional tax preparer or CPA.

If you have any questions that fall outside the situations here, give me a call and if you do not have an accountant to speak with, I can refer you to one.

First Time Homebuyers…The Clock is ticking…

Uncle Sam wants you to buy a house!  If you are a first time homebuyer, he is even willing to give you an $8000 tax credit to do so.  Time is ticking away…this deal only lasts through November of 2009.  With rates still low, many properties to choose from that are aggressively priced, it really is the time to take advantage of the deals and get $8000 from Uncle Sam.

As I have outlined before, the program is simple, however, if you have any questions, you may want to check with your accountant or CPA.  You can also check on the IRS’s website.  However, here is an outline of the program:

•  
  • Must be first time homebuyer – That means you haven’t owned a home in the past three years, and your spouse hasn’t either if you’re married.

  • Purchase home before December 1^st 2009

     

  •  File an amended return on your 2008 tax return, or wait to file on your 2009 tax return

     

  •  The credit is for 10% of the purchase price, up to $8000

     

  •  The credit amount starts phasing out if you make more than $75,000 or $150,000 if you’re filing a joint return.

     

  •  Enjoy the benefit of an $8000 tax credit

     

Again, with interest rates at historic lows, homes being aggressively priced, and an $8000 tax credit, now is an outstanding time to be a first time homebuyer!  But don’t forget, this offer does have an expiration date.  To be eligible for this money, you must purchase before December of this year.  So call a Mortgage Professional, get pre-approved, and go out there and find your dream home!

Did you know that if you have not owned property in the last 3 years that you are considered a first time homebuyer?  That means that you may be eligible for the $8000 first time homebuyer credit if you purchase a home before December 1^st, 2009.

The program is fairly simple: 

·Must be first time homebuyer – That means you haven’t owned a home in the past three years, and your spouse hasn’t either if you’re married.

· Purchase home before December 1^st 2009

·File an amended return on your 2008 tax return, or wait to file on your 2009 tax return

·The credit is for 10% of the purchase price, up to $8000

· The credit amount starts phasing out if you make more than $75,000, or $150,000 if you’re filing a joint return.

·Enjoy the benefit of an $8000 tax credit

With interest rates at historic lows, homes being aggressively priced, and an $8000 tax credit, now is an outstanding time to be a first time homebuyer!  But don’t forget, this offer does have an expiration date.  To be eligible for this money, you must purchase before December of this year.  So call a Mortgage Professional, get pre-approved, and go out there and find your dream home!