Green Real Estate in Idaho

So… interesting air quality news in the Treasure Valley this past week. The Treasure Valley Air Quality Board Council submitted a proposal last year to the Idaho Legislature (which was approved) to modify the requirements for vehicle emissions testing. Currently, as I understand it, all vehicles are required to be tested annually to ensure that their emissions are not negatively impacting the air quality here in the Treasure Valley. Since the valley here is essentially a huge bowl, we have been known to experience inversions with poor air quality when the weather conditions are right and the air stagnates.

Currently, or previously as the case may be, vehicles were tested annually at a fee of between $10 and $15 (depending on testing station). Vehicles that did not pass their test were required to be serviced and re-tested in order to maintain their registration. I say this with some certainty, but am unable to say for sure as I can find no information about this on the
emissiontest.org website, and of all the vehicles that I have ever owned, none have ever failed the test. Apparently, maintaining vehicles in good working order appears to do wonders for ensuring that they run with some degree of cleanliness. Unfortunately, I can’t say the same for other drivers here in the greater Boise area. I’m sure that many of you have been stuck behind the old clunker blowing blue smoke out the tailpipe, or the weekend warrior’s version of a monster truck that belches smokes constantly. Choking on fumes in traffic, it was always at least a small (ok, very small) consolation to know that hopefully those vehicles would fail their emissions test and get some service at SOME point. Well, with the new regs on the books, that may not be the case, at least not quite.

From 1984 to present, all vehicles manufactured on or after 1965 were to be tested annually. The new law states that all new vehicles for the first four years will be exempt along with hybrids and cars older than 1981. All vehicles that do require testing (built between ‘81 & 2006) will be tested every other year. Call me crazy, but if you’re going to exempt cars from testing, doesn’t it make more sense to exempt vehicles early in their lives when they’re the most likely to be running well with minimal maintenance? The first 5, 10, 15, or even 20 years make more sense to my keen unscientific mind for a pool of vehicles to be exempted. But everything built before 1981??

Taken from the Ada County Air Quality Board’s own website:

Over half of all vehicular pollution comes from only 10% of the vehicles. By identifying the dirtiest vehicles and getting them fixed the emissions testing program has been able to reduce vehicular pollution by about 18%.

Only time will tell if this shift in testing younger vehicles, every other year will have a negative impact on the air quality. But call me crazy, it doesn’t seem like a brilliant idea to this driver. The other kicker in parting… unless you drive an older vehicle, you won’t even save any money. Annual testing can be had for $10/year, bi-annual testing will be capped at $20 and as testing stations will now no longer test 15 years worth of vehicles and those that are tested only come by every other year, I would expect that it will be much harder to find sweet deals on pricing.

It’s been on the hearts and minds of many as we draw closer to the end of November deadline for the current First Time Home Buyer Tax Credit. Would the tax credit be extended, would it be expanded, should I wait and hope that it’s better later… All of these are questions that I have heard in the past few months as first time buyers scramble to put a plan in place to get across the finish line on their home purchase to take advantage of this program.

Before we get into the nittygritty of the program, I think it’s important to point out that this program does not, in my opinion, put people into homes that they can’t afford. I believe that some commentators have made this leap in logic to get attention for themselves, their opinions, or their websites despite the fact that there seems to be no merit to the claim. The tax credit is just that… a tax credit. It has no bearing on the buyers qualification in the eyes of the lender or underwriter and is not something that will directly increase their purchasing power. This is not to say that there are not unscrupulous buyers and lenders in the world that continue to try to play the system, but I think trying to blame the tax credit is a joke. What the tax credit DOES do is pull FIRST TIME buyers (and now existing home owners) into the market and off the fence. If you’re sitting on the couch thinking you should probably consider buying a house sometime in the next year or so, this credit has proven to be a strong incentive to get people moving forward and off the sidelines.

Now, let’s get into the heart of what happened today. As of yesterday the House and Senate had sent the bill to extend jobless benefits (which includes the home buyer tax credit) up to the White House. Earlier today, President Obama signed the bill into law. The tax credit measures within this bill, now law, extend the credit through April 30, 2010. Qualifying purchases must occur on or after January 1, 2009 and on or before April 30, 2010. One new caveat is that in cases where a binding sales contract is signed by April 30, 2010, and the home purchase is completed prior to June 30, 2010 will also qualify. Raise your hand if you think that last part might get ugly… Of course there are income limits. Previously these were $75,000 for single taxpayers and $150,000 for those married filing jointly. For sales occuring after November 6, 2009 those limits have been raised to $125,000 and $225,000 respectively. One item that has not changed, the $8000 tax credit is reserved for first time home buyers.

The ray of sunshine for existing home owners that want to/need to make a move is that an expansion of the tax credit has been created just for them. A $6500 tax credit will be available for existing home owners purchasing a principal residence after November 6, 2009 and on or before April 30, 2010, or purchased by June 30, 2010 with a binding sales contract signed by April 30, 2010. (The more I type that last part the uglier it gets). You qualify if you have owned and resided in a home for at least five consecutive years of the eight years prior to your purchase date. The income limits are the same as above, $125,000 for single tax payers, $225,000 for those married filing jointly.

In both instances, the tax credit amount is calculated to be 10% of the purchase price up to $8000 or $6500 respectively. Depending on your market… it’s probably going to be hard to get anything less than the max. Not many homes available in the Treasure Valley in the sub $80,000 price point. The tax credit continues to be “refundable” as in even if the tax payer has no federal tax liability they can claim the credit and will receive a check for the rebate. For complete details check out the Federal Housing Tax Credit official website.

Hopefully the expansion of the tax credit will continue to improve market activity for homes in higher price points, typically outside the buying power of many first time buyers. So, if you are considering up-sizing, downsizing, first time buying or anything in between give me a call and let’s get the process started. April 30 will be here before you know it. Don’t wait to the last minute and miss out on a golden opportunity!

but your purchasing power is going to decrease in the new year when the FED scales back their purchasing of mortgage backed securities. The FED recently extended this program, but it is expected to begin being phased out in early 2010. This has been a great thing going, especially in recent months as we remain at historic, low rates. Unfortunately, this is an artificial low and as the FED scales back the purchase of these securities you will see mortgage interest rates rise. While I do not expect them to spike, even if we break into mid to low six percent range those are still great rates, but anyone who is trying to buy a home with a tight constraint on what they can spend per month will be unpleasantly surprised.

This can be hard to comprehend unless we assign some values to the narrative, really get our hands dirty. Ok, not too dirty, I know I don’t like to play with math on a Friday afternoon so we’ll keep it simple. Let’s say that you are looking at a home and you will be borrowing $150,000. We’ll say that your annual property tax bill on a home at this price will be $1,500/yr and that your home owners insurance will be $300/yr. We’ll say these are fixed costs for our example. Now let’s take a look at what your payment will be at 5.4% and 6.25%.

At 5.4% APR: Principal & Interest Payment is $842.29/mo, Insurance is $25/mo, Taxes are $125/mo. Your total payment PITI comes in at $992.29

At 6.25% APR: Principal & Interest Payment is 923.57/mo, Insurance is $25/mo, Taxes are $125/mo. Your total payment (PITI) comes in at $1073.57.

Clearly this is not the end of the world, but if your monthly mortgage payment can not exceed $1000 and remain affordable, you’re no longer going to be able to shop for $150,000 homes when rates go up. Almost an extra hundred dollars per month, every month for the life of your 30 year loan. Now, to buy a home and keep your payment below that thousand dollar threshold you have just seen the max loan amount available drop to approximately $138,000. Twelve thousand dollars just evaporated from your home buying budget in this scenario; the only thing that changed was a modest increase in the interest rate. Also, not the end of the world, unless of course you can’t find any homes that meet your criteria at this price range.

One can never know exactly what the future holds. While I frequently wish that my crystal ball wasn’t broken, I do know that if you need to make a move and can afford to buy a home, it’s a fantastic time to be a buyer. Will it be a fantastic time to be a buyer next year? Probably. But the unknown of what the interest rates will be doing and whether or not the FTHB tax credit will be extended could absolutely have a serious, and likely negative impact, on the kind of home that you can buy. While it’s probably to late to be considering a short sale purchase and expect to be closed by November 30, 2009 there is absolutely still time enough to start the hunt on a more traditional purchase. Rates are good, inventory is there and more and more homes are priced appropriately, if not quite aggressively to really stand out amongst the sea of short sale, foreclosed property still out there.

If you would like to get more information, see a list of potential candidates here in the greater Boise area, or talk about your home buying options please give me a call. You can reach me directly anytime at 208-991-HOME (4663). You can also enter your information in the phone link (top right of every page) and be connected to me in no time. If you’ve found your way here, but Idaho isn’t your destination of choice, feel free to call or email anyway and I will be more than happy to go to work for you (at no charge of course) interviewing agents anywhere in the country you’re moving to in order to find the right agent for you. I have had outstanding results putting my friends, family, and past clients in touch with agents in their soon to be new community that will work just as hard for them as I would.

If you’re a first time home buyer that has been sitting on the sidelines waiting for interest rates to improve (come on, they are at 5.5% which is FANTASTIC), or a better selection (Spring/Summer usually represent the largest inventory levels) your time to take advantage of the $8000 tax credit is fast expiring. In it’s current format you must be closed (funded and recorded) on your purchase before December 1, 2009. As of this writing that leaves you with exactly 81 days to get across the finish line.

While 80+ days sounds like a long time, keep in mind if you’re not in the process at all yet you need to sit down with a lender and get pre-approved. You need to find a good agent that will guide you through the process, representing your best interests, find the perfect house and then navigate the escrow process. A typical escrow (in our market) is about 30 days. This absolutely does NOT include short sales. If you don’t have a short sale in contract at this point and the tax credit is important to you, you’ve probably already missed that boat. Many banks (not all) have expedited things considerably over last year, but it can still be 60+ days for an approval and THEN you open escrow.

While the $8000 tax credit certainly isn’t a deal breaker… I find that most people think the idea of getting $8000 vs not is pretty cut and dry. If buying your first home is on your list of things to do, now is the time to get into the game. Interest rates are still fantastic, prices are still down, and there are still some fantastic gems to be found. Granted, they are moving quickly, especially in the sub $200,000 price range. If you’re ready to make the dream of home ownership a reality, I’m ready to get to work for you to make that happen. Call or email me today!

Ben
208-991-HOME (4663)
ben[at]IdahoRealEstate.com