Applications for primary home mortgages are down to level not seen since May 1997. The Mortgage Bankers Association, the trade group for mortgage bankers, is attributing this to the expiration of the federal tax credit and overall slow economic revival. The data points to the week ending May 14.
To be completely fair, what the tax credit did was encourage people who would have purchased a home in the summer make an earlier decision. The tax credit was an incentive and it front-end-loaded the sales activity in the housing market. As I predicted and explained in our January post the first time home buyer tax credit impacted the real estate market cycle, accelerating sales activity by nearly 2 months!
What I am seeing is that the market in Cincinnati is still active despite the tax credit expiring. Buyer are still looking for homes and some made the decision that in their price point $8,000 was not enough of an incentive to purchase a home they really did not love. I am also working with a lot of buyers who did not qualify for the credit for one reason or another. They still want to buy.
The Tax credit was an economic stimulus measure to create economic activity in the market to boost the economy. It was not a subsidy for home ownership, in my opinion. When people buy homes they need ancillary services like movers, painters, contractors, plumbers, and carpenters. Home sales generate a lot of economic activity outside of the sale and that is what the tax credit was designed to do, I think, and from the numbers it looks like it served its purpose.
In recent days I have had a few phone calls from first time home buyers asking me if they should still buy a house even though they missed the $8,000 tax credit. In some cases they could not find the right house, or they did not hear that the credit was extended. Regardless of the reason they missed credit I tell the same thing; YES!
There are a number of reasons that this is a good time to purchase a home.
First is that over the long term Real Estate has been a solid long term investment. Over the years Cincinnati has seen relatively stable property value appreciation. Our property values did rise and fall with the rest of the country over the last 6 years, but we did not have the dramatic soar and crash like Miami, or Las Vegas. Invest in a home because you love it, not because you are looking for fast appreciation.
Second thing I point to is the closing gap between Rent and Ownership costs. With property values AND interest rates lower the gap between Rent and Ownership has shrunk substantially. According to a national study by Marcus & Millichap Real Estate Investment Services the difference between the cost of Rent and Ownership has decreased to as little as $100 a month in some markets. The study looked at 43 major markets and found that using the median home price and median rent the cost difference was $256. That is the smallest gap since 1993.
The third point is that there are still very good deals to be had. There are sellers who want to sell their home now and are willing to negotiate on price and terms to get the deal done. While it is still somewhat a buyers market sellers are also feeling the home values stabilize and may not be ready to give their home away in a fire sale. They key point I try to emphasize is that interest rates are at record lows. Home values have returned to 2003 levels, but the interest rates today are lower. Bottom line – the price may be the same but it will cost you less to buy the same hose today as it did in 2003 thanks to low interest rates.
For more information please e-mail me or call me at 513-518-1140
here has been a lot of talk recently about the impact of the Federal First Time Home Buyer tax credit. The newspapers, the talk shows, the blogs, and the radio dj’s have all been talking about how important it is. I wanted to take the opportunity and make clear, in detail, the benefits to first time home buyers, aside from the $8,000, and give some much needed insight into how this program is going to impact the number of home and condo sales in the Cincinnati real estate market in the winter/spring 2010.
The Federal Government extended the tax credit through April 30. This means that you must have an accepted contract signed by both parties by then and must close the sale on or before July 1, 2010. But there is more.
Did you know it now offers $6,500 to people who have already owned a home and are buying another larger or smaller home? So if, for example, you are looking to move out of Hyde Park and into the burbs, this credit is great news for you. The program is designed to create new inventory for first time home buyers. If you have owned and occupied your current home as your primary residence for 5 of the last 8 years then you may be eligible for a $6,500 tax credit depending on your income as there are income limits.
To qualify for the $8,000 tax credit you (and your spouse if you are married) cannot have owned a home within the last 3 years. If you owned a home and sold it back in 2005 to relocate and rented for 4 years then you may qualify! Never have you ever owned a home you say? I’d say it is worth finding out if you’re eligible for an $8,000 credit. There are income limits and sale price limits on this tax credit so please check with your accountant or Realtor to be sure you meet the criteria.
You should also know that you can use the tax credit in a number of ways. You can use it on your 2009 or 2010 tax returns. The credit amount is equal to 10% on the purchase price of the home up to $8,000 of credit, or $80,000 of purchase price. Now that you know there is an $8,000 credit waiting for you, how are you going to take advantage of it? What should you do? Who should you call? When do you need to take action?
The first step is thinking about your home as an investment, an investment you can sleep and entertain friends in. Start evaluating if home ownership is right for you right now. This is not a decision you should rush. It is always better to wait and buy when the time is right for you. Next, you need to speak with a mortgage lender and get prequalified for a loan that is within your financial means. Mortgage brokers or mortgage lenders can help you with this step. The third step is finding a house that is the best fit for you. But with an April 30th deadline when should you start and when should you write a contract?
If possible, you should start your home search in earnest in February, and submit your offer no later than mid April. You have to work backwards and look at the contracting process and the whole market to understand why February is the key month. Sellers who want to capture the surge of these qualified first time home buyers are going to need to get their houses prepared for sale and listed in February to give them the most exposure to the potential buyers. The same thing is true for buyers. If you are not actively looking for your dream home it may be purchased before you even see it. I believe that February is going to be a very active month for new listings and proactive buyers in every neighborhood in Cincinnati.
Typically the process of completing a contract from purchase to closing takes between 30 and 45 days. There are many steps that go into a real estate transaction, including home price negotiations, home inspections, repairs, remediations, loan applications and acceptance, appraisals and more. Another important tip is that it is best to try to secure a property before the April 30th deadline if possible to ensure enough time to find the property and negotiate agreeable terms. Inspectors will be busy, contractors will be booked, and banks underwriters will be backlogged. So the sooner you make an offer the better the chance you have of making the deadline.
If you have any additional questions about the Tax Credit and how you can take advantage of it please feel free to call me and ask questions. I would be happy to provide you resources and information that will make your home buying experience exceptional.
Alison Moss is a 9 year veteran of the real estate industry and can be reached at 513-518-1140 or by e-mail at Alison.moss@comey.com
The Ohio Association of Realtors features the 2009 home sales in their monthly publication. The below graphic shows a state wide look at sales volumes and price changes in specific regions of the state.
The good news is that here in the Cincinnati market the annual volume has not changed much year over yer. What is concerning is the 8% price reduction year over year. Cincinnati real estate sales increases by 33% in November, which was a surprisingly strong month. That influx is most likely due to the $8,000 first time home buyer tax credit.
With 2010 beginning my expectations and hoped for the local market are a continued stabilization in price, and a slow and steady increase in volume. The tax credit extension should help drive spring sales and as we move into the summer and fall the slowly rebounding economy should help more people feel more confident in purchasing a home.
Yesterday the Case-Shiller home price index came out, and it had some positive numbers. The C-S index looks at 20 major metropolitan real estate markets and watches the change in home sale prices on a monthly basis. The index provides numbers that are normalized for the home prices in the first quarter of 2000.
Because Cincinnati is not one of the markets observed by the index, we have o draw some conclusions from our closest neighbor, which is Cleveland. The below chart shows the decline and slow rebound of the housing market over the last 12 months in Cleveland.
Case Shiller Home Price index July 2009 - Cleveland
What we see in the numbers is that in February, March, and April of this year home values in Cleveland fell below the their 2000 value levels for the same months. But we also see an increase in home values as the spring and summer months arrive. In Cincinnati we saw a similar trend, driven by a number of factors including the season, first time home buyer credit, and improving macro-economic conditions.
If you have been thinking about moving up into a large home this may be the time to make the move. As prices begin to rise proportionately more expensive homes will gain in price faster than lower priced homes. A $500,000 home will cost $550,000 if it gains 10% in value, while a $200,000 home will cost $220,000. That is a $30,000 difference. call me today if you are interested in deeper local market analysis! 513-518-1140
The Cincinnati Area Board of Realtors recently issued their monthly report. The news is pretty much what we all in the real estate field expected. Prices are still slightly depressed, but home sale volume is slightly better than last year. August 2009 was slightly better than August 2008 in terms of the number of homes sold. The average cost of real estate sold is lower this year, due in part to the volume of short sales and foreclosures being purchased.
There is wide belief that the First Time Home Buyer Tax Credit has helped increase sales volumes and help avert further decline in our area’s home prices. The below graph shows the steady seasonal increase in sales that we see in our market during the warmer months of spring and summer. I am trying to impress on my clients that although the tax credit ends on November 1st, they truly need to have contracts written and the financing process started no later than the middle of October, and even that is cutting it close.
The deadline for the First Time Home Buyer tax Credit is quickly approaching. The language of the legislation reads that the homes must be closed by November 30th, and many home buyers are not aware of the time it takes to complete a real estate transaction. On average I have seen transactions take 30-35 days.
HOWEVER those transactions did not have to contend with a lending system that is currently running slow, and an impending of new contracts and lending requests that are certain to enter the system in the upcoming weeks. Considering the current systemic challenges I am telling my buyers that mid October is their deadline for securing a contract on a home and qualify for the credit.
The bottom line is if you are waiting until the beginning of November to make an offer and qualify for the credit you may be risking $8,000. If you have have your eye on a home CALL ME TODAY at 518-1140, or send me an e-mail to schedule a showing.
