Real Estate News for North Pinellas County

Archive for the 'tax credit' Category

Got your eye on a new Palm Harbor home? Don’t drag your feet.

I just sold a house to a couple who had been working with me since last November.  That’s right, it took them a full year to find the house they wanted to buy.

Were these people unusually picky, or were their requirements so specific that the right house simply wasn’t available for a really long time?  I would say “no” to both counts; I think they just wanted to be very careful in what they considered a very volatile market.  They wanted to make sure they didn’t pay too much in case the real estate market continued to free-fall, and they wanted to be sure they didn’t end up with a house that was going to cost a lot to upgrade.

This couple looked very actively during the past year, and they actually made offers on several houses. But if the negotiations on those houses began to bog down, or if the sellers didn’t act like they wanted to significantly drop their prices (and do so quickly), these people would back away.

I think their attitude was exactly the opposite of buyer attitudes two or three years ago, when buyers thought they had to act very swiftly in order to get the home they wanted. Now, caution rules the day for buyers, along with low-ball offers. I don’t think the low offers come so much from a desire to play hardball as from a fear of paying too much in a market where prices may have a way to go before hitting bottom.

The point of all this is the new first-time homebuyer tax credit, which the Congress just recently passed. This new tax credit offers an $8,000 tax credit to first-time homebuyers, and a credit of $6,500 to repeat buyers. That credit for repeat buyers MIGHT entice some move-up buyers to come back into the market, which has mostly been dominated by first-time buyers.

The original tax credit, which was launched last spring and which was to run only through the end of November, made home ownership possible for many first-time buyers. This new version continues to offer that, while also offering a tidy tax credit to people who are NOT first-timers.

But here’s the bad part (and the reason why I started out by talking about those buyers who took a full year to find a home they wanted to buy); this new tax credit is authorized only through April – buyers have to have a binding contract in place by April 30, 2010.

If you think your home search may take a number of months, you’d better get started now. April will be here before you know it.

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New homeowner tax credit may mean tax windfall for builders

Last week, the Congress extended the first time homeowner tax credit. But what wasn’t so obvious about that legislation is that it provides some really big tax breaks for home building companies.

Big builders like Lennar and Pulte could end up with hundreds of millions of dollars in refunds from the U.S. Treasury on taxes they paid as far back as five years, according to the Wall Street Journal. Those refunds are designed to help the companies cope with the big losses they have experienced in the past two years or so.

homebuilder pictureThe tax break will apply to large companies of all kinds. But it may be of particular benefit to the country’s biggest home builders, because they have experienced some really hefty losses as the economy has tanked over the past couple of years.

Some critics say they home builders don’t really need that much help because they have been selling off assets, such as land and unsold inventory, and bargain prices and then hoarding the proceeds. One source estimates that the 10 largest home building companies are sitting on average of $1.2 billion in cash each, quite a lot more than the $616 million cash average they had just a couple of years ago.

Pulte Homes says it may receive more than $450 million in tax refunds; Lennar Homes may get refunds of as much as $300 million.

One benefit to the tax refund news: stock prices for Lennar and other builders went up last week as the legislation was announced.

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Bills would extend tax credits beyond first time home buyers

sold-signThe real estate market is getting a bit better, and much of the action is taking place among first-time home buyers.

And why not? There are some really great deals at the less-expensive end of the market; first-time buyers usually don’t have an existing home that they have to unload before buying a new one; and let’s not forget that very attractive $8,000 first time home buyer tax credit from the federal government.

“But wait!” you say.  “What about me?  I’m not a first time home buyer, but why shouldn’t I get that $8,000 tax credit, too?”

Well, maybe you’re right. At least that’s what two members of Congress from the Dallas area think.  They have introduced legislation that would make the $8,000 credit apply to everyone and all houses. Not only that, but they would extend the tax credit all the way into 2010. The current tax credit only applies to homes purchased by Nov. 30 of this year.

The legislation comes from Rep. Kenny Marchant, a Republican, and Rep. Eddie Bernice Johnson, a Democrat. They have filed separate bills to expand the reach and the time limit for the tax credits. Marchant’s bill also includes a $3,000 credit that could be used by people refinancing their existing loans.

You would think that home builder and realtor lobbying groups would be all for these new bills. But they are acting cautiously because they don’t want anything to undermine the current tax credit which expires at the end of November.

There is plenty of legislative business already on the House calendar, so don’t expect fast action on these bills.  But that may change later in 2009, after members return from their summer recess.