Archive for the ‘Tax Credit’ Category

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Federal Homebuyer Tax Credit Closing Deadline Extended

Thursday, July 1st, 2010

After a close brush with the deadline, Congress has passed an extension of the Homebuyer Tax Credit closing deadline, the Homebuyer Assistance and Improvement Act (H.R. 5623). The extension applies only to transactions that have ratified contracts in place as of April 30, 2010 that have not yet closed.  The legislation is designed to create a seamless extension to new closing deadline for eligible transactions, which is now September 30, 2010.  There will be no gap between June 30 and the date the President signs the bill into law.

CONTACT US AT THE BOLD COMPANY FOR MORE INFORMATION

Builders Of Lifelong Dreams

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Best Time to Build a Home is Now

Friday, June 25th, 2010

Mortgage Rates Hit an All-Time Low

Average interest on a 30-year fixed mortgage fell to an all-time low of 4.69 percent this week, down from 4.75 percent a week ago, reports Freddie Mac.   Do not expect these rates forever.  Once the economy picks up rates will raise quickly.  Build now to lock in these rates for the next 30 years.

Builders Of Lifelong Dreams

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How to Claim the Kentucky New Home Tax Credit

Friday, June 18th, 2010

*The Kentucky New Home Tax Credit has been Extended.  To qualify for this credit, home purchases must be concluded before  January 1, 2011.

*The Kentucky New Home Tax Credit is NONREFUNDABLE.  This means that if your Kentucky tax liability is less than the $5,000 credit, then you will only receive a credit for the amount that you owe; you will not receive a refund for the difference, nor can you carry the difference back or forward to other years.  If your Kentucky tax liability is $5,000 or more you will receive the entire credit.    

*In Order to Qualify for the Kentucky New Home Tax Credit:

*the home must be a previously unoccupied, single family dwelling in the State of Kentucky

*the home must become the buyers’ principal residence for at least two years

*the home must NOT have been built by the homeowners themselves

*Tax Credit Applications MUST be FAXED, not mailed.  The fax number is (502) 564-3706.   Applications must be received within seven days of the purchase date.  Mailed applications will  NOT be approved.

*It’s Not Too Late to Apply for the Credit if you purchased a qualifying new home between November 7, 2009 and June 4, 2010.  Applications must be received by July 6, 2010.

*You May Qualify for BOTH the Federal Homebuyer Credit AND the Kentucky New Home Credit if you purchased a home between November 7, 2009 and June 4, 2010.

*For more information or for an application, refer to the Kentucky Department of  Revenue:   Kentucky New Home Tax Credit

 ASK THE BOLD COMPANY FOR MORE INFORMATION ON THE KENTUCKY NEW HOME TAX CREDIT

Builders Of Lifelong Dreams

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Homeownership Tax Advantages

Tuesday, June 1st, 2010

Buying a home is one of the smartest purchases you can ever make. One reason is that homeownership has many positive tax implications. The three most important sources of tax savings for home owners are the:

  • deductions for mortgage interest
  • deductions for real estate taxes
  • capital gain exclusion for the sale of a principal residence 

 The deductions for mortgage interest and real estate taxes reduce the annual cost of homeownership by reducing the home owner’s tax liability each year.  For example, a home owner with $10,000 in annual mortgage interest payments and real estate taxes and who falls in the 25 percent tax bracket could realize up to $2,500 in tax savings each year.  Home owners who itemize their taxes can deduct from taxable income interest allocable to a first or second home for up to $1 million of mortgage debt and $100,000 of home equity loans.  And most state and local taxes paid on homes are also deductible.

When the home is sold, the capital gain exclusion can again provide home owners a tax benefit.  Under present law, sellers of a principal residence can exclude from taxation profits from the sale of a home, up to $500,000 for married taxpayers and $250,000 for single taxpayers.  With capital gain tax rates expected to increase from 15 to 20 percent in coming years, these tax savings can be substantial.

Research by NAHB economists has estimated the tax savings for home owners for certain income and mortgage amounts. For a married couple with an income of $80,000 per year and an initial mortgage amount of $250,000, the tax savings from the mortgage interest and real estate tax deductions are estimated to save the couple more than $11,000 in the first five years of homeownership.  Assuming the couple owns the home for twelve years, these savings grow to more than $25,000 over the time period. Combined with the capital gains exclusion, the total tax savings for the entire period of ownership exceeds $52,000.

For a couple with an income of $60,000 and an initial mortgage of $180,000, the five years tax savings total more than $6,000 and the total savings over a twelve year period are estimated to be more than $33,000.

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Plenty of Reasons to Buy a New Home Even After the Tax Credit

Wednesday, May 26th, 2010

May 24, 2010 – Even though the home buyer tax credit expired on April 30 and won’t be renewed, there may never be a better time to buy a home than today, according to the National Association of Home Builders (NAHB). Many outstanding opportunities still exist for home buyers, but they may not be around forever.    

“The home buyer tax credit was just one of many factors motivating Americans to buy homes,” said NAHB Chairman Bob Jones, a builder and developer in Bloomfield Hills, Mich. “But buyers can still take advantage of today’s low interest rates and competitive prices to get a home they may not have been able to purchase just a few years ago.”

Besides mortgage interest rates that have been hovering at near-record lows, homes in many markets have become more affordable. Prices have moderated from the highs of the housing boom that occurred in most of the country, especially in major markets where they had increased significantly.

Today’s new homes are also built to be much more energy efficient than homes constructed a generation ago, making them more affordable to operate. New homes are designed to support modern lifestyles with open floorplans, flexible spaces, improved safety features, and low-maintenance materials.

Consumers who are thinking about buying a home should not count on interest rates or prices staying at current levels, however. Mortgage rates are sensitive to market conditions, and even a slight increase can push monthly payments beyond a family’s budget. As the country recovers from the recession and people stabilize their financial situations, NAHB economists expect that home prices will begin to increase by 2011.

NAHB’s home buyer brochure “Opportunity Knocks for Home Buyers” describes many of the opportunities in today’s market, as well as the long-term financial benefits of homeownership. It provides examples of how interest rates affect monthly mortgage payments and the typical federal tax savings over the first five years of homeownership. The brochure can be downloaded from NAHB’s web site at: www.nahb.org/homebuyerbrochure. 

The home buyer tax credit is still available for eligible home buyers who had a signed sales contract by the April 30 deadline and who close by June 30, 2010, as well as for qualified members of the military, foreign service and intelligence communities, who have until April 30, 2011, to sign a contract. For more information, go to www.federalhousingtaxcredit.com.

 

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Eye on the Economy, May 5, 2010

Monday, May 10th, 2010

 

Some Good News on the Housing Front
The home buyer tax credit finally started showing an impact in March, when existing single-family home sales rose 7.3% to a seasonally adjusted annual rate of 4.68 million. That was a 16.6% increase over the sales pace a year earlier. Sales were up both monthly and annually in all four Census regions.New single-family home sales also rallied in March, jumping a near record 27% from February’s sales pace of 324,000 to a seasonally adjusted 411,000, up  24% on a year-over-year basis. The South showed the biggest gain — 43.5% — and the Northeast was the second most robust region of the country for sales, coming in at 35.7%, although rebounding from  an unusual low in February.While the approaching expiration date for the home buyer tax credit accounted for much of the bounce back, unseasonably harsh winter weather in February added some pent-up demand to the housing market in March.

In order to qualify for the home buyer tax credit, buyers had to sign sales contracts by April 30 and they are also required to meet a closing deadline of June 30. Since new home sales are reported when a contract is signed, April new home sales should be robust. Existing home sales are recorded at closing, so they should see a lift from the tax credit through June.

To the extent that some prospective home buyers have moved their purchases forward to qualify for the credit, new home sales after April and existing home sales after July are likely to experience some leveling off. At that point, the reviving economy, low mortgage rates, affordable house prices and new job growth will take over as the forces driving home buying activity.

In the meantime, adverse credit conditions will continue to serve as a speed bump in the housing recovery as buyers grapple with tighter credit standards and builders attempt to overcome major impediments to obtaining and renewing acquisition, development and construction (AD&C) loans.

Builders also continue to face intense price pressure and competition from foreclosure and short sales. Appraisers are using distressed sales in  their valuations of newly built properties without properly adjusting for the run-down conditions of many previously owned homes that have been languishing on the market. Pressure from banking regulators can further encourage “low ball” appraisals. For builders, unfortunately, poor appraisals often can result in  lost sales.
 
 
Housing Starts Continue to Rise
Adding more good news to the current housing scene, housing starts rose in March for the third consecutive month. March total starts were up 1.6% from February, up 20% from a year earlier and up 31% from their cyclical low of 479,000 in April of last year — even though single-family production declined to 531,000 units, down marginally from 536,000 in February.The decline was technical in nature, resulting from a decline in the Midwest following a considerable jump in residential construction activity in that region in February. Even so, single-family starts in March were up 47% on a year-over-year basis, and taking  the Midwest out of the picture, they were up 6.9% for the month.Single-family building permits in March jumped 5.6% from February and 51% from a year earlier, and were at their highest level since August 2008. Builders are obtaining permits at this point to rebuild their inventories — which at 228,000 in March were at their lowest level  since early 1971 — and because they are adopting a  positive view of future demand.

Multifamily starts, on the other hand, appear to be bouncing along at the bottom. March’s 95,000 starts were just above the first-quarter average of 92,000 starts. Multifamily permits, although from a decidedly  low level, have shown an upward bent. This may be an early indication that some financing is becoming available for a limited, but growing number of projects. [return to top]
 
 
Some Positive House Price Reports
House prices have generally stabilized on the national front. In many markets house prices are either stable or increasing. In others, prices are continuing to adjust downward in reaction to to distressed properties and/or poor near-term economic prospects.As of February, the S&P/Case-Shiller seasonally adjusted 10-city price index rose 1.1%, the ninth monthly increase in a row. However, the 20-city index fell 1.1%, its first decline in nine months. Nonetheless, both the 10-city and 20-city indexes were still up from a year earlier (by 1.4% and 0.6%, respectively).The LoanPerformance Home Price Index produced by First American CoreLogic showed a similar result, with house prices up 0.3% in February from a year earlier. Excluding distressed sales, the index was up 0.6%, the first year-over-year increase for the index since December 2006.

March median new home prices rose on a year-over-year basis for the third month in a row, up 4.3% ($214,000 versus $205,100). Despite foreclosed home sales and short sales, median existing home prices edged up 0.6% in March from a year earlier ($170,700 versus $169,700), the first year-over-year rise since July 2006. [return to top]
 
 
Inflation Remains Tame
The Consumer Price Index (CPI), although up 2.3% in March on a year-over-year basis from February’s 2.1%, was down from its recent peak of 2.7% in December 2009. Meanwhile, core inflation (prices excluding food and energy prices) rose a modest 1.1% in March, down from 1.3% in February and 1.8% as recently as December 2009.However, building material prices, which fell during much of the housing recession, have experienced upward pressure of late. Prices for single-family construction in March were up 2.7% from a year earlier  and multifamily prices were up 3.0%. These prices have risen five months in a row. With much of the world, along with the United States, in a recovery mode, many of these prices are likely to continue to rise.Nonetheless, overall prices in March were still below their peak levels of September 2008, with single-family materials construction prices down 2.0% and multifamily prices down 3.8%. Also, some of the sharp price increases recently for materials such as lumber reflect  temporary supply shortfalls that are likely to be reversed quickly in the next few months. [return to top]
 
 
The Financial Markets Remain Steady
Although it is difficult for builders to obtain financing, home buyers who can qualify for a mortgage continue to face very favorable interest rates. For the past six months, mortgage rates have hovered around 5%. Despite the Federal Reserve’s withdrawal of support from the mortgage market at the end of March, the Freddie Mac 30-year fixed-rate mortgage rate has risen only about 0.1%.Following its recent meeting, the Federal Open Market Committee (FOMC) issued a press release indicating that economic conditions “are likely to warrant exceptionally low levels of the federal funds rate for an extended period,” keeping its target federal funds rate in the 0.0% to 0.25% range.Level mortgage rates and the approaching home buyer credit deadline have increased demand for mortgages. April purchase applications returned to their October 2009 high, when the first-time home buyer tax credit was in effect. Demand for government mortgages (FHA and VA) have been on the rise since the beginning of this year. [return to top]

 

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Jumbo Loans are Easier to Get

Monday, May 10th, 2010
By Robert Freedman, Senior Editor, REALTOR® Magazine

The jumbo market appears to be thawing, at least according to a couple of recent articles in the trade and general press. But I’d be curious to know what you’re seeing in your markets.

One of the things I learned when I interviewed Vijay Lala of Bank of America Home Loans late last year is that the jumbo market started coming back in 2009, but it was mainly the really big national players like BofA that were making the loans. They were the only lenders with the financial heft to hold the loans in their portfolios comfortably. Smaller lenders, with no Wall Street players willing to securitize jumbo mortgages and unable to hold the loans in their portfolios, couldn’t get into the market.

Well, apparently what’s changing is that we’re beginning to see securities market for the loans coming back. According to an April 24 piece in the Washington Post, Redwood Trust, in a Securities and Exchange Commission filing, said it would sell $222 million in securities backed by pools of jumbo mortgages. The article went on to say that the average balance of the mortgages would be about $933,000, and that the securities, when they’re issued, would the first since the market collapsed.

The mention of Redwood Trust came deep into the article but I wonder if it should have been played up more, because if the company is successful in attracting investors, then lenders other than the big national banks will be able to at least start thinking about making loans, providing competition to the big banks and maybe helping to move the market to a more normal place.

Right now, the average interest rate on jumbo loans for the most credit worthy borrowers is about 6 percent. That’s extremely low by any reasonable standard, down from something closer to 8 percent during the height of the mortgage crisis. But lenders want to see a lot of skin in the game, more than 20 percent of the loan amount, and, at least for the last couple of years, it’s just been hard to get applications approved, even for good borrowers.

For some people—consumers and real estate people alike—the jumbo market isn’t considered that relevant to them. It’s for high-income households buying high-end houses. But in quite a few markets, houses listed at the $729,750 high-cost conforming loan limit and above are, if not mid-market houses, then not too high above the mid-market. So the difficulty borrowers have been having getting these loans hurts quite a bit.

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Mike Kegley and Other Kentucky Builders Meet on Capitol Hill

Tuesday, May 4th, 2010

On Wednesday, April 21st, builders from across the nation converged on Washington, DC to express their frustrations with the economy and the home building business climate.  Seated below with Senate Minority Leader Mitch McConnell (far right) are (left to right) Mike Kegley, President Elect of the HBA of Kentucky, Jody Sharpe, State Representative to NAHB and Mac Crawford, 2010 President of HBA of Kentucky.

Kentucky Builders Meet with Senator McConnell (R-KY)

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Consumer Confidence at Highest Level Since September 2008

Wednesday, April 28th, 2010

Consumer confidence increased this month to the highest level since September 2008, considered the height of the financial crisis when banks were failing and the credit crunch was the worst.

The Conference Board — a private research group in New York — said the Consumer Confidence Index climbed to 57.9, from 52.3 in March. The closely watched index details consumer sentiment about business and the job market for the next six months.

Consumer spending accounts for 70 percent of the nation’s gross domestic product, making the Consumer Confidence Index important for the long-term economic outlook and the still-struggling recovery.

However, the index is far from indicating a healthy economy, which generally requires an index of at least 90. But it’s also far from the record-low of 25.3 in February 2009.

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Home Buyer Tax Credit Extended for Service Members

Tuesday, April 27th, 2010

 The National Association of Home Builders (NAHB) wants members of the military, foreign service and intelligence communities to know that they may have an additional year to buy a home and claim the home buyer tax credit, which expires for most Americans on April 30.

The law provides qualified service members who served on official extended duty outside of the United States for 90 days or more at any time between Jan. 1, 2009, to April 30, 2010, another year to buy a home and claim the credit. They have until April 30, 2011, to sign a sales contract, and until June 30, 2011, to settle and close on the home. Both the $8,000 first-time and $6,500 repeat home buyer tax credits are included in the rule.

“Congress recognized that many service members may have missed out on the home buyer tax credit due to being posted overseas,” said NAHB Chairman Bob Jones, a builder and developer in Bloomfield Hills, Mich. “It is only fitting that they be given another year to take advantage of this opportunity in appreciation of the sacrifices they have made serving our country.”

“Qualified service members” are defined as a member of the uniformed services of the United States military, a member of the Foreign Service of the United States, or an employee of the intelligence community.

The rule that requires buyers to repay the credit if they move out of their home within three years has also been waived for qualified service members if they have to sell their home due to receiving government orders for extended duty service. 

NAHB provides information on the home buyer tax credit, including eligibility requirements and links to home buying resources, on its consumer website www.FederalHousingTaxCredit.com.

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