RISMEDIA, October 1, 2009—(MCT)—Realtors are bracing- make that hoping- for a flurry of activity in the next few weeks as a tax credit for first-time home buyers edges toward its expiration.
The incentive offers a tax credit of 10% of the purchase price, up to $8,000, for first-time buyers with certain income limitations. The tax credit was created as part of the $787 billion federal stimulus package in February to help stimulate the property market. It is set to expire Nov. 30, though some lawmakers are pushing to extend the deadline.
“Starting back in the summer, we started seeing a real uptick in people asking about it,” said Larry Strother, chairman and owner of ERA Strother Real Estate.
Nationwide, more than 1.4 million first-time buyers have filed the credit on amended 2008 tax returns, according to the Internal Revenue Service. North Carolina ranks 10th among states, with almost 45,000 filers. Local home sales dipped in August 2009 but had been climbing steadily in the months before that. The local market has been one of the strongest nationwide, with the military presence cited as one of its pillars. Fort Bragg also is why first-time buyers account for anywhere between 40% and 60% of the local market, according to Realtor estimates.
Real estate agent Joyce Register has helped six first-time buyers this year. She said all of them asked about the tax credit. “They certainly had it in mind,” she said.
Realtors say falling home prices and interest rates hovering around 5% have done more than the tax credit alone to lure first-time buyers. But it does appear to have nudged some into buying. “There were a lot of buyers who were on the fence, who were renting and maybe weren’t sure if they were ready, and this first-time home buyer tax credit got them off the fence,” said Kelli Bennett, a mortgage loan specialist with Key Mortgage in Southern Pines. Bennett has been holding seminars to tell potential buyers about the credit. The question she said she hears most is whether the credit has to be paid back, which it doesn’t if the buyer lives in the home for at least three years.
If the tax credit is edging some families closer to purchasing, it’s not enticing them to buy something a little bigger when they take the plunge, Strother said.
“The interest rate does that,” he said. “When the interest rate goes lower, we start seeing people buy more house than they would have, because they’re able to afford more. People in our marketplace, they’re buying payments.”
Anyone who wants to take advantage of the tax credit needs to hustle. The purchase must be complete by Nov. 30 to qualify. The processing time of about 45 days for a home sale leaves less than a month to get the ball rolling. “We’re getting close,” said Jimmy Townsend of Townsend Real Estate. “It needs to be done in the next couple of weeks. And in my opinion, that’s pushing it.”
There are a cluster of bills in Congress to extend the tax credit for at least another six months. The White House has said it’s reviewing them but must weigh the risks to the market if the credit expires versus the cost of extending it.
The program would cost an estimated $15 billion if it were to be extended. That’s more than twice what was projected in the stimulus bill. But Strother says the government is getting value for its money. “The housing industry has always led this country into recessions and has always been the one single thing that has led us out of recessions,” he said. “If we want the economy to improve faster, we need more houses to sell.”
The local Realtors support the extension efforts; the credit has been an eye-catching advertising tool. But they say military buyers would insulate the market against a dip if the credit does expire, which has been the case during the worst of this recession. “I want to promote it, but I don’t want to make like it’s the end of the world if it does expire,” Townsend said. “People who are not going to buy a home are not going to buy a home just because of the tax credit. A home is not something you buy like a stock. It’s a place to live. It’s the American dream.”
Copyright (c) 2009, The Fayetteville Observer, N.C.
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