Denver Real Estate Watch

The End WAS Near…

But like all good Hollywood movies, a surprise twist came in at the last minute and it is a game changer….  Sometimes our government says, “JK” (for those of you who don’t text-speak that means JUST KIDDING )  See, our leaders have a sense of humor and a bit of drama in their blood.  So, get to the point already:

WE HAVE AN EXTENSION TO CLOSE ON THE FTHB (First Time Home Buyer) and SHB (Second Home Buyer credits). 

Imagine the floor of the House last night as the drama unfolded.  The original terms to cut off any credit was that the closing of the property HAD to be done, closed AND funded by June 30, 2010.  Title companies were swamped with the need to close. And when all things seemed to indicate that there would be no extension, in a late night vote…VOILA, the House voted to extend it.  Here’s the official news release given by our National Association of Realtors:

Congress passed an extension of the closing deadline for the Homebuyer Tax Credit, 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; the new closing deadline for eligible transactions is now September 30, 2010. There will be no gap between June 30 and the date the President signs the bill into law. Extending the tax credit closing deadline will help provide additional stability to real estate markets across the nation.

I imagine there was a mass sigh of relief heard across the country!  (I thought I felt a breeze come through about 10pm MST).  But seriously, I am hoping it helps those buyers already under contract that are entangled in the short sale nightmare with lenders.  It takes months to get approvals, and so this additional time will be great to give more time to liquidate our distressed properties.  But really lenders/banks/asset managers/PMI companies… can you not see the benefit of making quick decisions and streamlining this process?  That’s an article for another time.

Til then… I’m out busy selling and buying for people.  Will you be next?

The RUMOR MILL is Relentless

An opinion piece in the Spokane, Wash., Spokesman-Review last month reported inaccurately that the health care bill contained a provision for a 4.0 percent “sales tax” or “transfer tax” on the sale of a home and the rumor mill has been busy ever since.  The article, as stated above, was inaccurate. 

My sources tell me, however, that the health bill does include a provision that imposes a new 3.8 percent Medicare tax for some high-income households that have “net investment income.”  Any revenue collected by the tax is dedicated to the Medicare hospital insurance program.

This new tax applies only to households with Adjusted Gross Income of more than $200,000 for individuals or more than $250,000 for married couples.  Since capital gains are included in the definition of net investment income, an additional tax obligation might result from the sale of real property.  
But there are two major factors in figuring out the tax, which is complex.  Keeping in mind that the new 3.8 percent Medicare tax is assessed only when the $200K/$250K AGI limits are exceeded, the amount of net investment income subject to tax is the LESSER of 1) total net investment income OR 2) the excess of AGI over the $200K/$250K AGI limits.  
However, even when the AGI limits are met, the new tax would not be applied to capital gains that result from the sale of a home, since the existing home sale capital gains exclusion rule still applies – $250,000 (individual)/$500,000 (couple).  So if the gain from the sale of the primary residence is below that amount, then NO Medicare tax will have to be paid on the gain.  The new Medicare tax would apply only to a home sale gain realized in excess of the $250K/$500K that pushes the filer’s AGI over the $200K/$250K income limits.  
Some other quick points:
There is no such exclusion for the sale of a second home.
The new Medicare tax will take effect January 1, 2013.
The legislation makes no changes to the mortgage interest deduction.AND ANOTHER ERRONEOUS EMAIL….

This email claims that pending legislation in the Senate would require an energy license or retrofit for home sales.  Here’s the real skinny:  

“Homeowners—Listen Up” e-mail:
This e-mail is inaccurate. There is no requirement in H.R. 2454, The American Clean Energy & Security Act, that home sellers obtain either a license or energy audit or make energy retrofits before they can sell their home. The legislation, earlier passed by the House, is pending in the Senate.
         Here are the two REAL provisions in the bill:

• Section 202 (Building Retrofit Program) would offer matching grants for home improvements.  State government would administer the program, which is voluntary and available to all property owners.

• Section 204 (Building Energy Performance Labeling Program) would apply to new construction only and prohibit time-of-sale labeling.  The original energy audit was deleted as the result of NAR (that’s the National Association of REALTOR) insistence; existing real estate was excluded from the bill’s requirements.

Once again, REALTOR’s have your best interest in mind.  Can you imagine the nightmare if it had past without excluding existing homes and mandating audits? WHEW.

Service Members Get Extra Year for Tax Credit

Members of the U.S. military, foreign service and intelligence communities have another year to purchase a home and claim the home buyer tax credit.

Any service member who is or has been on extended duty for 90 days or more between Jan. 1, 2009 to April 30, 2010, has until April 30, 2011, to sign a sales contract and until June 30, 2011, to close on the property. Both the $8,000 first-time and the $6,500 repeat home buyer tax credits are included in the extension.

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 receive government orders to move.

Source: The National Association of Home Builders (04/26/2010)

92% of homes sold priced below $500,000 in the Denver area

 An analysis of Metrolist data by independent broker Gary Bauer shows in the eight-county Denver area, almost 93% of the homes sold and closed in the first quarter were priced below $500,000.  “The biggest change that I see is that in 2008 and 2009, homes priced below $100,000 accounted for a much bigger part of the overall housing market than in 2010,” Bauer said.  ”First, there are just not as many homes priced below $100,000 out there.  All of the activity is no longer at the low-end.  We are seeing more activity in the $200,000 to $300,000 range and the $300,000 to $400,000 range.”                                          1st Quarter Home Sales

Reprinted from insiderealestatenews.com

Comments from Cheri:

Looking at that chart reaffirms the difficulty in getting a property under $200,000 under contract.  I am experiencing multiple offers, bidding wars and full price offers, making this price range a seller’s market.  The higher you go in price ranges, the less the percentage the seller is getting to the listed price, clearly indicating a buyer’s market.  What a strange time.  It will be interesting to see what will happen May 1st and if this activity will survive the end of the tax credits.

Forbes had an article released this month putting Denver at the bottom of big cities for their real estate market.  They gathered information from Zillow, one of the most unreliable sources for statistical data.  The sources they use include multiple listings for the same home, creating a 27% increase in their numbers.  We haven’t had 42,000 homes on the market for years, and to use improper data was very damaging to our community.  Major companies make decisions on relocating their employees based on the health of the housing market.  The day the article was released, I went into our MLS system and had 18,743 single family homes on the market.  That didn’t include townhomes ad condos, although even that number can be skewed because many agents will put a duplex home in each category, giving it an opportunity to be counted twice. 

So here’s the bottom line:  DON’T BELIEVE EVERYTHING YOU READ.  Call a Realtor who is in the know, or knows how to get the right answers.

Last Weekend for Tax Credit Buyers

Not to be an alarmist but…..If you haven’t already gotten out to find your home to take advantage of the tax credit….THIS IS IT! GO, GO, GO, GO, GET.

The $8,000 or $6,500 credit will not be available on properties that go under contract after April 30th, 2010.  There is one exception: uniformed military or intelligence personel who are serving overseas.  

The caveat to this tax credit is that if you sell before 3 years are up, you will have to pay the money back, even in hardship or job transfer, and even if you rent the home prior to the 3 yrs because of any of those reasons.  Tough, huh?  But they are trying to keep the credit clean for home OWNERS, not home BUYERS. 

I happen to know a good agent if you need one today, tomorrow, this week or the future   Let me know.

TICK TOCK

As you can tell, I’d rather not blog if I don’t have something spectacular or noteworthy to say.  I don’t think you really want or need to know when I took my dog for a walk or what I ordered at Starbucks. Having said that, this is important…Are you ready?

THE END IS NEAR

April 30th 2010 is the end. Some thought 2012 was the end but that was just in the movies.  The end is just around the corner actually. You MUST have a property fully under contract by April 30, 2010 to be able to claim the first time home owners (FTHO) tax credit. You can’t just have an offer, it must be fully executed, signed by all parties to be eligible.  So get on it to get it.  The second part to the criteria is the property that has been identified must close on or before June 30, 2010.  PLEASE don’t wait and close on the 30th either.  That day will be crazy and it’s just too risky to wait until the last minute.  Too many things can delay a closing, little things like funding.    Every agent can give you nightmarish stories about closing on the last day of the month, or even the last Friday of a month.  So get it closed early, you won’t regret it.

SECOND TIME BUYERS can take advantage of the same date guidelines in buying a replacement home.  To qualify, you need to have lived in the home you are selling for 5 of the last 8 years.  And the replacement home can not cost more than $800,000 which leaves alot of homes to choose from in our inventory of the Denver market. 

It is a good time to be a buyer.  But our market is ever changing and right now more stable than it’s been in years, so don’t miss out on the “bottom” by guessing when that will happen.  By then, it may be too late for the credit and for the dynamic changes to come.

SIGNED & SEALED

President Barack Obama signed into law the HR 3548 bill, the bill aimed at extending unemployment benefits, and extending /expanding the first time home buyer credit.   His signature, on Friday late afternoon, marks a huge boost to the real estate market, and an unprecedented bipartisan agreement as the  Senate voted 98-0 on Wednesday and Thursday the House voted 403-12 on HR 3548. 

 There are significant changes, intended to curtail fraud and increase accountabilty to home buyers.  The first time home buyer has until April 30th, 2010 to have an accepted offer on a home and close on or before June 30, 2010.  To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.  The maximum allowable credit for first-time home buyers is $8,000.

It  also creates a separate credit of up to $6,500 for people who already own a home and are buying one to move into.  Those current home owners qualify by purchasing a home between November 7, 2009 and April 30, 2010, and have used the home being sold or vacated as a principal residence for five consecutive years within the last eight.  The maximum allowable credit for current homeowners is $6,500.

The income limits for the credit have changed also, which is effective on November 7, 2009.  Single buyers with incomes up to $125,000 and married couples with incomes up to $225,000—may receive the maximum tax credit.

So, just how is a Buyer’s Credit Amount Determined?

Each home buyer’s tax credit is determined by two additional factors:

1. The price of the home.
2. The buyer’s income.

Price

Under the Extended Home Buyer Tax Credit, credit may only be awarded on homes purchased for $800,000 or less.

Buyer Income

Under the Extended Home Buyer Tax Credit, These income limits have changed from the 2009 First-Time Home Buyer Tax Credit limits.  Make sure to consult your tax advisor to find out how your credit will be applied. 

It’s important for you to have a knowledgable, updated REALTOR® working for you.  Call me!  I am that person you want representing you in your next transaction.

AWAITING PRES. OBAMA SIGNATURE

Update on Tax Credit Extension

Senate Banking Committee Chairman Chris Dodd, D-Conn., said top Dems agreed to extend the 1st-time homebuyer tax credit, set to expire Nov. 30. Bloomberg reported Senators are near a deal to extend the program to home sales signed — not closed — by April 30. The credit would be cut 10% to $7,290, but those who’ve owned their current home for at least 5 years also would be eligible.

Stay tuned, it could change again!  No date on a vote!

Vote to Extend and Expand the $8,000 First Time Homebuyer Tax Credit

The United States Senate is expected to vote, later today (10/27/09), on a bill to extend Unemployment Insurance benefits. This bill will contain the Dodd – Lieberman – Isakson Amendment to Extend and Expand the $8,000 First Time Homebuyer Tax Credit.

The Extended and Expanded Tax Credit will contain the following provisions:

Amount: $8,000

Eligibility: ALL HOME BUYERS (Step-up buyers will have to have lived in their current home for SEVEN* years to be eligible)

Income Limits: $125,000 for single filers/$225,000 for joint filers

Time Frame: December 1, 2009 to April 30, 2010 plus 60 Day extension if binding contract is in place by April 30, 2010

*The 7 year ownership requirement is designed to lower the “score” or cost of the tax credit. This is still open to change. The Congressional Budget Office is going to “score” the cost of 3 year and 5 year requirements. We are continuing to push for step-up buyers to be required be in their current home for three year period.

National Association of Realtors (NAR) will be monitoring the progress and any potential changes to the bill. NAR will send out a notice when the legislation is voted on tonight–regardless of how late into the night or early into the morning the debate continues. I will keep you posted here.