Green Real Estate in Idaho

While you might not know that we’re already deep into spring time here in the Treasure Valley based on the weather, the calender doesn’t lie and neither does the bump we’re seeing in the market. Historically, the Treasure Valley real estate market is very cyclical with slower times in the late fall and winter months and a vigorous revitalization in the spring and summer which peaks in late July.

This year is no different, in fact early spring sales got a terrific shot in the arm with home buyers seeing the expiration of their tax credit incentives drawing to a close. The vast majority of home buyers taking advantage of this opportunity were focused on the $110,000 to $180,000 price points and they came out in droves before the end of April (2010) at which time they had to have an executed contract on their property of choice to qualify.

Some agents and analysts lament this activity and appear to anticipate a dramatic drop in activity post tax credit. While this opportunity for buyers did accelerate many first time buyer time lines I do not anticipate closings to plummet. Buyers late to the party will be closing throughout May and June. Individuals and families that are buying up or buying down were less likely to be affected by the tax credit and are more likely to be focused executing their move later this summer. While activity in the entry level housing market (sub $200,000) has probably peaked, sales will continue and likely we’ll see homes at higher price points coming under contract during the summer.

The issue that continues to plague this and every market is the amount of distressed property that must be absorbed. The number of distressed homes for sale, short sales or REO/Bank Owned, outnumber traditional resale and have for months. This continues to put downward pressure on prices. Prices have stabilized considerably but the “fire sale” pricing of short sale and REO homes will likely depress prices for the foreseeable future, at least the next several years.

Why will things continue for the next several years you may be asking… well, the reason is simple. Before the sweeping mortgage reforms, most home buyers opted for 3, 5, or 7 year ARMs meaning that in X number of years the fixed mortgage APR becomes adjustable. Since most homes purchased in the last 5+ years are now underwater these homes will likely wind up as future bank owned or short sale listings. Thankfully, interest rates continue to be at all time lows, realistically there is no way they will stay here for ever. I’m the first to admit that I am no financial guru, but to see rates at 6% or higher in the next 12 months doesn’t seem at all unrealistic. 6% is still a fantastic interest rate, but when buyers become used to 5% there will be a crunch when rates rise.

It will all work itself out. Bottom line is that prices are down, interest rates are fantastic, and the amount of home that your money will buy is downright incredible. While many sellers will not like what the market will support in the sale of their home, if they are buying up the returns (in the form of savings) can far outweigh them.

As of last Friday there has been an exciting improvement to the $8,000 ($8,000 or 10% of sales price, whichever is less) tax credit available to first time home buyers. Now, buyers using FHA approved lenders will be able to take an advance on their $8,000 credit and put it towards their down payments and or closing costs.

While the stimulus provides this credit to first time buyers (or those that have not owned a home for the past 3 years) the $8,000 previously could only be collected after the close of escrow by filing an amended 2008 return or waiting to claim the credit in 2010 on the buyers 2009 tax return.

I expect this to make a great thing even better as many first time home buyers find it difficult to come up with thousands of dollars in closing costs along with a down payment. For additional information regarding this new program consult your preferred lender. You can read the full article about this new program here.

This is most certainly a hot topic, and the source of much contention lately in both political and real estate circles as everyone throws in their two cents. Before I go down that road however let’s highlight what it is that we ended up with in the bill that should be signed into law today by President Obama.

The new and improved First Time Home Buyer Tax Credit is now $8000.00 (eight thousand dollars) and has become a true credit, rather than a no interest loan repaid over 15 years. This credit is still only available to first time buyers, or those that have not owned a home in the last three years. I’ve been asked if one spouse purchased the home before marriage or was the sole spouse used to qualify for the loan if the other spouse could be considered a FTHB under this new provision. The short answer is, not likely. The long answer is check with your tax preparer to see what kind of leeway they think you will have. What I know about this is that if in the past three years you have claimed your home you are out of luck. If you purchased your home prior to marriage but you did your taxes “Married Filing Jointly” then I expect that would flag your spouse as having owned a home during that time. If this were the case and you were filing seperately from your significant other… that is where I just don’t know.

I have seen a number of complaints among people (mostly online) lamenting that this measure doesn’t go far enough and should have been made to apply to ANY home buyer. While I do agree that offering incentives to all buyers, rather than just first time buyers, would be more beneficial to markets across the country; at this point I’m just happy to have SOMETHING. There isn’t going to be a magic bullet for stopping or reversing the housing crisis. Frankly, at this point I am just as interested to see what is going to happen to help home owners that are in trouble keep those homes. One of the bricks around the neck of many neighborhoods are the flood of short sale/REO property that drive down property values.

Housing will continue to be a prominent player in the state of the economic recovery here in the US. Hopefully we can get this problem under control sooner rather than later. The number of families affected is staggering.

If you would like additional information please don’t hesitate to contact me. There are fantastic First Time Home Buyer opportunity here in the Treasure Valley. With prices where they are and interest rates at such low levels it’s an incredible time to become a home owner and start building future wealth and security.

Just past in the Senate is an ammendment to the pending stimulus bill.  As a quick aside… why don’t they call this a recovery bill?  After the debacle of the TARP/Stimulus you would think they would try to seperate them as much as possible.

Back to the matter at hand.  Sen. Johnny Isakson (R) Georgia introduced an ammendment to the bill that would convert the $7,500 First Time Home Buyer Tax Credit into a $15,000 (or 10% of purchase, whichever is less) credit for ANY home buyer purchasing a home to owner occupy.  What does this mean?  Well, a few things.  The $7,500 credit to first time home buyers is GREAT, but it is only open to first time buyers that have not owned a home in at least the last 3 years.  It also has to be paid back over 15 years ($500 per year due at tax time), but it is interest free.  The new amendment not only doubles the amount but it removes any recapture after 2 years of ownership.  While not clearly outlined in the article that I read, I would expect the same income limitations to be in place.  It also makes this credit available to any home buyer shopping for their personal residence, no investment property.  Upon further inspection it also appears that this credit could be claimed on 2008 taxes.

While this passed unanimously in the Senate it would still have to go back to the house after the modifications to the bill are complete for a vote.  Something this particular ammendment does not address is relief, restructuring, or some other form of assistance to home owners that are struggling to keep their homes.  While there seems to be new issues on the economic front every day to make things look a little more gloomy (job loss, consumer spending, credit markets) hopefully we can find enough little becons of light to get everyone through.

You can read an overview of the amendment over at USNews.