Home Buyer Tax Credit Stimulates Sales – The Morning News – Northwest, Arkansas, USA
By Kim Souza
THE MORNING NEWS
Last updated Saturday, May 9, 2009 10:15 PM CDT in Business
SPRINGDALE ? Blake and Christen Trolinger of Rogers recently used an $8,000 federal tax credit for first-time home buyers to help them capture their share of the American Dream.
“It’s almost too good to be true,” said Christen Trolinger.
The couple was able to borrow much of the down payment from a parent and get the seller to pay the closing costs, which enabled them to secure financing and make an offer.
After filing their taxes and collecting the credit, the couple repaid the family member in full and had enough money left over to buy a new refrigerator and washer and dryer.
The most difficult part of the whole process was finding a home in the couple’s modest $90,000 price range, said Tammy Fagan, agent with Crye-Leike Real Estate in Fayetteville.
Fagan showed the couple more than 85 homes in a six-month period, including dozens of foreclosures and other distressed property sales from Rogers to Elkins.
“When the couple first began looking, they were entitled to a $7,500 tax credit that would have to be repaid over 15 years. It was enough to get them house hunting, but several months passed and two of their offers were declined. So we just kept looking,” Fagan said.
In late January, the federal government expanded the tax credit to $8,000 with no repayment requirement. The criteria is fairly simple: The home must be bought between Jan. 1 and Dec. 1 of this year and first-time home buyers are those who have not owned a home in the last three years. Income limits for a couple receiving the full credit are $150,000 and $75,000 for a single buyer, according to the National Association of Realtors.
The credit is equal to 10 percent of the home’s purchase price up to $8,000.
Fagan said the Trolingers made an offer on the Fannie Mae foreclosure in Rogers in January. The listing price of $105,000 had recently been lowered to $95,000. The couple offered $87,000, but it was rejected by the bank. They just kept looking.
After 30 days elapsed, Fagan said the price on the Rogers home was lowered to $84,500, so the couple then made a full-price offer that was accepted by the seller.
The accepted offer was less than the one rejected the month prior.
The 1,300 square-foot home was completely renovated in 2005 with granite countertops, crown molding, high-end lighting and appliances as well as wood floors and ceramic tile in both bathrooms.
“It’s great to see a young couple get such a good deal. The home appraised for $25,000 more than the sales price, which means instant equity,” Fagan said.
Blake and Christen said the tax credit was a major reason they decided to take the plunge into home ownership.
Industry experts say the $8,000 tax credit, home affordability and low interest rates are creating a near-perfect buying opportunity in the local housing market.
“There hasn’t been this many incentives to buy a home in my 37 years of real estate experience,” said Pat Harris, president of Harris McHaney Realtors.
He said the government’s $8,000 tax credit does more than generate home sales for first-time buyers like the Trolingers.
Harris estimates each $8,000 tax credit can stimulate as many as two additional sales beyond the first-time buyer, creating a ripple effect.
First-time buyers purchasing starter homes under $130,000 free up those sellers to buy bigger homes priced between $150,000 and $180,000. Those sellers then are able to move into higher-end homes above $200,000, experts say.
In the case of the Trolingers, the seller was a bank and this transaction took one more foreclosed property out of the inventory. Foreclosures and distressed sales put downward pressure on home prices. But as that inventory is absorbed, home prices will begin to firm up, the experts predict.
George Faucette, president of Coldwell Banker Faucette Real Estate, and Martha Prowell, executive broker for Lindsey and Associates in Rogers, agree the tax credit is stimulating sales even in the face of higher unemployment.
“Most first-time buyers would be shopping in the $150,000 or lower range and could be the most vulnerable to rising unemployment in terms of savings and income cushions against job loss. But the new tax credit is enough incentive to push many of them off the fence into the buying arena. Qualifying buyers can file an extension to their 2008 tax return and get the credit in a matter of days,” Faucette said.
The extra cash is a powerful incentive on top of 4.5 percent interest rates and steep discounts in certain neighborhoods, he said.
Faucette recently polled his agents about the tax credit’s effect on buying activity.
“Overwhelmingly, the agents in Rogers and Fayetteville reported more buyers actively house hunting primarily because of the tax credit, but lower finance rates are also boosting buyer interest,” he said.
About 75 percent of the agents polled said they have recently closed home deals that involved the tax credit, Faucette added.
Prowell also reported a heavier than normal buying activity in the $80,000 to $120,000 price range, primarily from young families wanting to move out of apartments and into single family homes.
“There is a renewed sense of urgency among first-time buyers who can own a home for nearly the same or less money each month that they pay in rent,” Prowell said.
She and the other insiders say they are seeing multiple offers on homes in the $120,000 and below price range, an indication the market is thawing from a long winter freeze.
In The Know
The Credit Cannot Be Taken If . . .
? Income exceeds the phase-out range. This means joint filers with modified adjusted gross income of $170,000 and above and single taxpayers with income of $95,000 and higher.
? The buyer purchases the home from a spouse, parent, grandparent, child or grandchild.
? The buyer stops using the home as a primary residence.
? The buyer sells the home before the end of three years.
? The buyer is a nonresident alien.
Source: National Association of Realtors (NAR)