National Association of Realtors President Ron Phipps said good buying opportunities will continue. “Traditionally there are far fewer buyers competing for properties at this time of the year, so serious buyers have a lot of opportunities during the winter months,” he said. “Buyers will enjoy favorable affordability conditions into the new year, although mortgage rates are expected to gradually rise as 2011 progresses.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 4.30 percent in November from a record low 4.23 percent in October; the rate was 4.88 percent in November 2009.

“In the short term, mortgage interest rates should hover just above recent record lows, while home prices have generally stabilized following declines from 2007 through 2009,” Yun said. “Although mortgage interest rates have ticked up in recent weeks, overall conditions remain extremely favorable for buyers who can obtain credit.”

A parallel NAR practitioner survey shows first-time buyers purchased 32 percent of homes in November, the same as in October, but are below a 51 percent share in November 2009 from the surge to beat the initial deadline for the first-time buyer tax credit.

Investors accounted for 19 percent of transactions in November, also unchanged from October, but are up from 12 percent in November 2009; the balance of sales were to repeat buyers. All-cash sales were at 31 percent in November, up from 29 percent in October and 19 percent a year ago. “The elevated level of all-cash transactions continues to reflect tight credit market conditions,” Yun said.

Form the National Association of Realtors, NAR

The Pending Home Sales Index, a forward-looking indicator, rose 10.4 percent to 89.3 based on contracts signed in October from 80.9 in September. The index remains 20.5 percent below a surge to a cyclical peak of 112.4 in October 2009, which was the highest level since May 2006 when it hit 112.6.

Last October, first-time buyers were motivated to make offers before the initial contract deadline for the tax credit last November. The data reflects contracts and not closings, which normally occur with a lag time of one or two months. Lawrence Yun, National Association of Realtors chief economist, said excellent housing affordability conditions are drawing home buyers. “It is welcoming to see a solid double-digit percentage gain, but activity needs to improve further to reach healthy, sustainable levels. The housing market clearly is in a recovery phase and will be uneven at times, but the improving job market and consequential boost to household formation will help the recovery process going into 2011,” he said.

“More importantly, a return to more normal loan underwriting standards and removal of unnecessary underwriting fees for very low risk borrowers is needed and could quickly help in the housing and economic recovery,” Yun said. Recent loan performance data from Fannie Mae and Freddie Mac clearly demonstrates very low default rates on recently originated mortgages, much lower that the vintages of 2002 and 2003 before the housing boom.
The PHSI in the Northeast jumped 19.6 percent to 71.3 in October but is 27.3 percent below the tax credit peak in October 2009. In the Midwest the index surged 27.3 percent in October to 81.7 but is 24.8 percent below a year ago. Pending home sales in the South rose 7.1 percent to an index of 93.8 but are 18.4 percent below October 2009. In the West the index slipped 0.4 percent to 104.3 and is 15.6 percent below a year ago.

Near term, Yun expects home sales will continue to climb from their cyclical low this past summer. “Even so, we now have some consumer concerns regarding the mortgage interest deduction, an important component in housing affordability,” he said. “Preliminary results of a new survey show nearly three out of four home owners and two out of three renters consider the mortgage interest deduction to be extremely or very important to them. Home owners already pay between 80 and 90 percent of all federal income taxes and additional tax burden would hurt them and the economic recovery, so we have a reasonable hope that it will not be changed.”

Source: National Association of Realtors - NAR

You can qualify for up to $1,500 in tax credits when filing 2010 income tax returns. 

Home owner have until Dec. 31 to qualify for the tax credit. 

Home owners can take advantage of the tax credit (Internal Revenue Code Section 25C) for efficiency upgrades made to existing homes, such as for certain types of insulation, windows, roofs, water heaters, heat pumps, furnaces and air conditioners. Tax credits are available for 30 percent of the cost up to $1,500 for 2009 and 2010. 

Tax credits — also up to 30 percent of the cost of the qualifying products — are available for equipment using renewable energy, such as solar, geothermal, wind or fuel cells (under tax code section 25D). However, you have until the end of 2016 to take advantage of that tax credit program. 

To learn more about what renovation projects qualify, visit the Nattional Association of Home Builders resource page on the energy efficiency tax credits. 

By Melissa Dittmann Tracey, REALTOR® Magazine

The California Home Energy Rating System (HERS) Program provides a reliable way to estimate and compare the energy efficiency of California homes and identify wise energy saving improvements. Whether you are buying or selling a home, or staying in your current residence, knowing your home energy rating will help you choose smart energy upgrades and investments that will save you in energy costs, improve your home comfort, and protect the environment. As buyers become more aware of the benefits of an energy-efficient home, homes with a favorable home energy rating may be more appealing to buyers.

In California, new homes must be built to comply with the latest Building Energy Efficiency Standards (Standards). A majority of homes, however, were built before the first Standards were established in 1978 with limited energy efficiency measures. Additionally, homes built after 1978 continue to have significant opportunities for energy efficiency improvements.

For more information, contact:
Energy Standards Hotline
Phone: (800) 772-3300 or (916) 654-5106
E-mail: title24@energy.state.ca.us

TIGTA’s study found that an estimated 4.1 percent of the approximately 1.77 million individuals receiving the tax credit had incorrect purchase dates recorded at the IRS.  The report also found that $10.1 million in home buyer credits were claimed by taxpayers who were identified as deceased by the Social Security Administration.

TIGTA recommended that the IRS take steps to correct the errors and IRS officials agreed with the recommendations and stated that they plan to take steps to improve controls.

More information at: http://www.ustreas.gov/tigta/press/press_tigta-2010-51.htm

KEEP THIS IN MIND!

• The bill extends the deadline to close escrow for home buyers who entered into a home purchase contract by the April 30 deadline. First-time buyers may be eligible to receive up to $8,000 and qualified existing homeowners may receive up to $6,500 if the home buyer closes escrow by Sept. 30.

• Home buyers entering into sales contracts May 1 or later are not eligible for the federal tax credit, but they may qualify for the California home buyer tax credit.

• The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) and the NATIONAL ASSOCIATION OF REALTORS® worked closely with members of Congress to extend the deadline. Estimates from NAR show nearly 180,000 home buyers nationwide would have missed out on the tax credit if the deadline was not extended, including nearly 17,700 home buyers in California.

• Many of the home buyers who would have missed out on the tax credit are in the midst of purchasing a short sale or foreclosure, which generally take longer to close due to the amount of paperwork involved in the transaction.

To read the full story, please click here:

http://money.cnn.com/2010/06/30/news/economy/homebuyer_tax_credit/index.htm

As the Federal $8,000 tax credit ends, it would seem that here, nothing is lost as the first time buyer can trade that credit for a $10,000 State tax credit.  However, they are far from similar. 

The key differences between the two credits are…

1. The Federal credit comes in one chunk $8,000 if you qualify – and relatively soon after which helps the home buyer recoup perhaps up to 100% of his move-in on the deal.
2. The Federal tax credit was not conditioned on a tax liability, thus even if you did not owe once cent in taxes, you could still receive the $8k – SWEEEEET! 

The State credit is paid out in 3 increments of maximum $3,333 each over tax years 2010, 2011 & 2012.  This is a lot less up front.  Secondly, and more important is this…you can only get the credit against actual state income taxes owed in those tax years.  

Here is a typical example on a first time buyer purchasing an average home at $275,000. 

On a USDA 100% loan (or FHA 96.5%) the payments (PITI) are about $2,000.  If the borrower meets guideline ratios of 31/41 for this purchase (assuming about 10% of income goes to other debts like auto, credit cards, etc) Annual income to qualify is $77,400. 

The tax writeoff for owning this home is about $11,000 so this tax payer itemizing his deductions will take off about $15,000 for taxable calculations.  A family of 4 on this income will have a State tax liability of $1,640 so that is the maximum tax benefit he car reap from the State credit.  Multiply this by 3 years and his $10,000 is diminished to actual credit benefit of $4,920 or less than ½ of the limit. 

What happens to the other $5,080?  Absolutely nothing!  The State of California is off the hook.  This means that the $100 Million designated to the first time buyer program is likely diminished to about $50 Million – pretty clever of your lawmakers.  This extra money will not be designated to go out to more first time buyers unless they re-write the law.  And they cannot compute the leftovers until 2013! 

“The end of the federal tax credit on April 30 will remove some urgency from the market, but is not likely to derail current market trends as favorable prices and low mortgage rates continue to attract buyers and investors,” said C.A.R. President Steve Goddard. “The March year-to-year median price gain of 20.8 percent was the largest in more than five years. With the number of homes for sale in the state expected to remain lean, gains in the statewide median price may well outpace the nation going forward.”

Closed escrow sales of existing, single-family detached homes in California totaled 516,590 in March at a seasonally adjusted annualized rate, according to information collected by C.A.R. from more than 90 local REALTOR® associations statewide. Statewide home resale activity increased 2.5 percent from the revised 504,200 sales pace recorded in March 2009. Sales in March 2010 decreased 2.5 percent compared with the previous month.

The median price of an existing, single-family detached home in California during March 2010 was $301,790, a 20.8 percent increase from the revised $249,790 median for March 2009, C.A.R. reported. The March 2010 median price increased 7.8 percent compared with February’s $279,840 median price.

“While the federal tax credit has helped drive sales, near record-high affordability resulting from current prices and low mortgage rates also has impacted the market,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “Four years ago, the median price to household income ratio was at a record high of 10 to one. It’s now near a historic low of four to one.”

The new law extends the existing credit for first-time homebuyers, worth up to $8,000, through April 30, 2010.

A new credit of up to $6,500 is available to qualifying existing homeowners who buy a new primary residence (or have one built) by April 30, 2010, if they owned their existing home for five consecutive years over the last eight years.

Home buyers will have to repay the credit if they live in their primary residence less than 36 months and are not members of the military.

The new rule also raises the qualifying income limits to $125,000 for single taxpayers and $225,000 for joint taxpayers, from the current $75,000 and $150,000.

The maximum allowed home purchase price is $800,000.

Both first-time home buyers and others must close escrow by June 30, 2010. Remember, it may take 60+ days to close, so don’t procrastinate!

Military personnel, deployed overseas for a minimum of 90 days in 2008 or 2009, would have until April 30, 2011 to claim the tax credit.

Buyers can claim the credit on their 2009 taxes, even if the purchase is made in 2010 by filing an amended return. Buyers who don’t owe taxes can have the credit refunded to them.

More information is available from the Internal Revenue Service (IRS}, including a question and answer page.

That’s all good news for the housing market. It doesn’t matter if you’re buying in Placerville, El Dorado County, California or any other state.