Homebuyer Tax Credit: Longer and Broader

Winter can be the doldrums in real estate sales. But at least for the next five months, expect a flurry of activity in the local, and national, housing markets.

That’s because Congress and the Obama administration has given first-time homebuyers an extra 150 days or so, until April 30 of next year, to buy a house and claim an $8,000 tax credit.

On top of that, existing shoppers who have owned a home as a principal residence for at least five years can claim an up to $6,500 credit to purchase a house, as long as it’s $800,000 or less.

“The stimulus point of view is very encouraging,” says Ralph Wetherell, a Realtor with AgentOwned Realty in Summerville and president of the Charleston Trident Association of Realtors. “If you get people buying and selling homes, prices maybe will go up.”

And the tax credit would be spent locally. “It’s the tentacle effect,” he says. Spending will be at local pizza parlors and home improvement places. “The $8,000 comes to the homebuyer and is spent in the community,” says Wetherell, who last week attended the National Association of Realtors annual meeting in California.

He said the additional $6,500 credit for existing buyers, a tradeoff for not extending the first-time homebuyer deal even longer, was “the icing on the cake.”

Still, he expects this to be the last tax credit, so buyers should decide by April if they want a break.

Steven Kendrick, owner of locally based Structures Building Co., acknowledges that the first-time homebuyer credit didn’t impact his business because he’s a custom builder of higher-end houses.

The $6,500 credit for existing homebuyers, however, is a different matter especially since it is available on homes selling for up to $800,000.

“I think it is really interesting,” Kendrick says. “It’s really opening it up to the move-up buyer.” The only possible trouble spot he sees are wealthier home owners who want to downsize and still face troubles selling their house if it's worth more than the $800,000 maximum.

Window of opportunity

Local tract home builders are also pleased with the government’s action.

“First-time buyers really cannot pass up this opportunity.” says Jason Esposito, director of sales in the Charleston Division of Eastwood Homes. “We saw some buyers on the fence because they felt that they could not close in time for the previous Nov. 30 deadline for the tax credit. Now that the extension has been passed and the year-end sales are on, they are really being given a once-in-a-lifetime opportunity to buy because of the … deals that are out there.”

In addition to the first-time homebuyer extension, the new bill offers the $6,500 credit to existing homeowners who choose to “move-up” and purchase a new home, so long as they have been in their existing home a minimum five years, he says.

Neither of these credits need to be repaid; however, new homeowners must write a contract by April and close on their home by June 30, Esposito says.

Builders like Eastwood Homes, whose product is built with the first-time buyer in mind, are offering year-end savings on their Move-In-Ready homes, he says. “In most of its six communities in the Charleston area, buyers can save more than $16,000 on a new, well-appointed home.”

Eastwood Homes features a variety of floorplans and prices in their Move-In-Ready lineup. Homes start in the $130,000s and offer buyers value.

Rebecca Gooden of Mount Pleasant-based Gooden + Faircloth Real Estate Services says the legislation increases the income threshold for a first-time homebuyer to qualify for the $8,000 tax credit. For a single person, that limit was increased from $75,000 to $125,000. For married couples, the income threshold increased from $150,000 to $225,000.

Real estate agents said the original tax credit helped spur home sales in the $300,000 and under price range, Gooden says. She notes that the CMPS Institute, an organization that certifies mortgage bankers and brokers, contends the extended pool of qualified home buyers could spike home sales in areas where the cost of living is higher.

Some brokers are succinct in expressing their pleasure for the extended and expanded credit. “Great news for homebuyers (including) first-time buyers and existing home owners moving up to a different home,” says Joe Gilligan of Carolina One Real Estate.

John Burns, president of John Burns Real Estate Consulting firm based in California, says the home building industry got a huge boost last week as the extended and exapnded tax credit, officially known as the Worker, Homeownership and Business Assistance Act of 2009, was passed.

Among the implications, builders are likely to construct speculative homes – those not already pre-sold – to close by June “because it will be tougher to sell homes thereafter.”

Burns says the $6,500 tax credit for existing owners should help some. “We don’t believe this is enough money to stimulate more purchases, but it is enough money to get buyers who have been sitting on the fence to get off the fence. Active adult builders are likely to be the big beneficiary.”

Reach Jim Parker at 937-5542 or jparker@postandcourier.com

REVISED HOMEBUYER TAX CREDIT

Congress has extended and expanded the homebuyer tax credit and President Obama signed the bill into law. Here are the rules as enacted:

First-­time buyer – amount of credit: $8,000.

Definition for eligibility – may not have had an interest in a principal residence for three years prior to purchase.

Current homeowner – amount of credit: $6,500.

Definition for eligibility – must have used the home sold or being sold as a principal residence consecutively for five of the previous eight years.

Termination of credit – purchases after April 30, 2010.

Binding contract rule – so long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until July 1, 2010, to close.

Income limits – $125,000, single; $225,000, married. Additional $20,000 phase out.

Limitation on cost of purchased home – $800,000.

Purchase by a dependent – ineligible.

Anti­fraud rule – purchaser must attach documentation of purchase to tax return.

Source: National Association of Realtors