The home buyer tax credits that pumped up existing and new home sales are gone. To take advantage of either the $8,000 first-time home buyer tax credit or the $6,500 long-term home owner tax credit, you must have signed a valid contract by April 30, 2010. You have until June 30, 2010, to close on the deal.(The only exceptions are if you are a member of the U.S. armed forces, military intelligence, or foreign service on qualified extended duty or if you or your spouse has been deployed overseas for ninety days or more in 2008 and 2009. If that’s you, you’ll have an extra year to claim the tax credit.)
While more than a million Americans took advantage of the home buyer tax credit, millions more are finding at least two other reasons to buy a piece of real estate: super-low prices and mortgage interest rates that have hit a fifty-year low in 2010.
Does it make sense to buy a home even if you can’t get a home buyer tax credit? It might—especially if you can buy the right property at the right price and on the right terms.
The National Association of Realtors (NAR) recently downgraded its assessment of the housing market, believing that fewer homes will be sold in 2010 now that the home buyer tax credits have expired.
According to NAR chief economist Lawrence Yun, the only way the housing market recovery will be self-sustaining is if “the economy can add jobs at a respectable pace, and from a return of buyer demand as they see home values stabilizing.”
Assuming that job growth stays nominal for the remainder of this year but the number of foreclosures continues to rise, home values should continue to fall slightly. That means you can buy a home this year in many locations at an even more advantageous price than you could last year.
And with the turmoil in Europe, investors have fled back to the security of U.S. Treasuries, pushing down mortgage interest rates. If you buy this year, you’ll spend less to buy the property and even less to finance it, locking in at interest rates that are at nearly fifty-year lows.
But you can’t just scoop up a property willy-nilly and expect it to turn into a fabulous investment overnight.
Whether you’re buying a home to live in or to rent out, you must think strategically about what you’re buying, where you’re buying, and how you’re going to finance it.
Most important, think long-term: whatever you buy, plan to own it for the next five to seven years.
Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!. She blogs about money and real estate at ThinkGlink.com and at the Home Equity blog for CBS MoneyWatch.
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7 comments:
This is good advice for someone looking to buy a house in the near future.
Now is a great time to be a renter, too. I've seen lots of condos that couldn't sell being rented out for reasonable prices.
While the Federal tax credit is gone, California has plunked $200 million into homebuyer credits. $100 million for buyers of brand new homes; another $100 million for first time homebuyers.
When they offered half that much last year, the credits were grabbed up in about three months. Clearly, they boosted home sales.
Any other state that wants to encourage home sales might want to consider doing the same thing.
Remember, home purchases mean increased expenditures on related items, with job increases in the related fields - home contents, yard and landscaping improvements, insurances, higher property taxes.
Just some stray thoughts...
Eva
Your TaxMama
Speaking or property taxes, as home prices fall, property taxes should decline as well, right? What's the best way to determine whether or not your change in property taxes is reasonable based on local conditions (and protest your city/county raises your property taxes in a declining market (likely to close budget deficits?)
@Greg:
You're right - as home prices fall, property taxes should fall as well. Only county tax assessors are usually working with property values that are two to three years old. In the next year or two, as reassessments take place, you should start to see property taxes fall.
But watch out for this: State and local governments are also broke and need additional funds to balance their budgets. While your property taxes should fall in value, the tax rate might increase as local and state governments need more cash. So, you might wind up paying more, even though your property is worth substantially less.
The only way to check on whether what you're being charged is reasonable is to look up what other houses that are similar in age and amenities to yours are being charged for property taxes. You might wish to hire a property tax attorney to help you file the appeal.
Thanks for your comment.
@Eva:
Thanks for those insightful "stray thoughts." They're extremely help - especially for those who live in California.
Ilyce
@Ravi and @Jenn:
Thanks for your comments.
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