The Gardner Group Blog

After falling to the lowest level in at least 38 years, long-term mortgages followed bond yields higher this week.

A 30-year fixed-rate mortgage averaged 4.81 percent in the week ending Dec. 10, up from 4.71 percent last week. Long-term rates are still well below year ago levels, when 30 year mortgages averaged 5.47 percent.

A 15-year fixed-rate mortgage averaged 4.32 percent this week, with one year adjustable-rate mortgages averaging 4.24. percent.

"Following an upbeat employment report, long-term bond yields rose slightly and fixed mortgage rates followed," says Freddie Mac (NYSE: FRE) chief economist Frank Nothaft.

Pending sales of existing homes rose for the ninth consecutive month in November, up 3.7 percent from the previous month. Pending sales of existing homes were up almost 32 percent from a year ago, the biggest annual increase on record.

The National Association of Realtors now predicts self-sustaining housing market conditions and firming home prices in most areas by the middle of next year, citing a continued decline in inventories.

From Washington Business Journal

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Updated Nov. 17, 2009, to add more information on the new legislation

from http://www.irs.gov/newsroom/article/0,,id=204671,00.html

New legislation, the Worker, Homeownership and Business Assistance Act of 2009, which was signed into law on Nov. 6, 2009, extends and expands the first-time homebuyer credit allowed by previous Acts. The new law:

• Extends deadlines for purchasing and closing on a home.
• Authorizes the credit for long-time homeowners buying a replacement principal residence.
• Raises the income limitations for homeowners claiming the credit.  

Under the new law, an eligible taxpayer must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2010 and close on the home by June 30, 2010. For qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 return.  

For the first time, long-time homeowners who buy a replacement principal residence may also claim a homebuyer credit of up to $6,500 (up to $3,250 for a married individual filing separately). They must have lived  in the same principal residence for any five-consecutive year period during the eight-year period that ended on the date the replacement home is purchased.

People with higher incomes can now qualify for the credit. The new law raises the income limits for homes purchased after Nov. 6, 2009. The credit phases out for individual taxpayers with modified adjusted gross income (MAGI) between $125,000 and $145,000 or between $225,000 and $245,000 for joint filers. The existing MAGI phase-outs of $75,000 to $95,000 or $150,000 to $170,000 for joint filers still apply to purchases on or before Nov. 6, 2009.

Several new restrictions apply to homes purchased after Nov. 6, 2009.

• Purchasers must attach a properly executed settlement statement to their return.
• No credit is available if the purchase price of the home exceeds $800,000.
• The purchaser must be at least 18 years old on the date of purchase. For a married couple, only one spouse must meet this age requirement.
• A dependent is not eligible for the credit.
• The new law gives the IRS broader authority to deny first-time homebuyer credit claims, without having to first audit a taxpayer's return. Known as math error authority, this authority applies, retroactively, to credits claimed on original and amended 2008 returns, as well as to claims yet to be filed.

Additionally, there are new benefits for members of the military and certain other federal employees:

• Members of the uniformed services, members of the Foreign Service and employees of the intelligence community serving outside the U.S. have an extra year to buy a principal residence in the U.S. and qualify for the credit.
• In many cases, the credit repayment (recapture) requirement is waived for members of the uniformed services, members of the Foreign Service and employees of the intelligence community.

More information on these new benefits for the military, Foreign Service and intelligence community serving outside the U.S. is available.   

General Information

Homebuyers who purchased a home in 2008, 2009 or 2010 may be able to take advantage of the first-time homebuyer credit. The credit:

• Applies only to homes used as a taxpayer's principal residence.
• Reduces a taxpayer's tax bill or increases his or her refund, dollar for dollar.
• Is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.

The credit is claimed using Form 5405, which you file with your original or amended tax return.

 

For 2008 Home Purchases

The Housing and Economic Recovery Act of 2008 established a tax credit for first-time homebuyers that can be worth up to $7,500. For homes purchased in 2008, the credit is similar to a no-interest loan and must be repaid in 15 equal, annual installments beginning with the 2010 income tax year.

For 2009 Home Purchases

The American Recovery and Reinvestment Act of 2009 expanded the first-time homebuyer credit by increasing the credit amount to $8,000 for purchases made in 2009 before Dec. 1. However, the new Worker, Homeownership and Business Assistance Act of 2009 has extended the deadline. Now, taxpayers who have a binding contract to purchase a home before May 1, 2010, are eligible for the credit. Buyers must close on the home before July 1, 2010. [Added Nov. 12, 2009]

For home purchased in 2009, the credit does not have to be paid back unless the home ceases to be the taxpayer's main residence within a three-year period following the purchase.

First-time homebuyers who purchase a home in 2009 can claim the credit on either a 2008 tax return, due April 15, 2009, or a 2009 tax return, due April 15, 2010. The credit may not be claimed before the closing date. But, if the closing occurs after April 15, 2009, a taxpayer can still claim it on a 2008 tax return by requesting an extension of time to file or by filing an amended return. News release 2009-27 has more information on these options.

Questions and Answers

More information is available in the question and answer section.

Related Items

• IR-2009-83, First-Time Homebuyer Credit Provides Tax Benefits to 1.4 Million Families to Date
• The American Recovery and Reinvestment Act of 2009: Information Center

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Realtors' index rises 6.4% in August for 7th straight gain as tax credit deadline boosts activity.

By Les Christie, CNNMoney.com staff writer

Last Updated: October 1, 2009: 10:45 AM ET

NEW YORK (CNNMoney.com) -- Homebuyers signed more sales contracts in August than in any month this year, boosted by the looming expiration of a homebuyers' tax credit, according to an industry report released Thursday.

The August Pending Home Sales Index from the National Association of Realtors (NAR) surged 6.4%, the seventh straight month-over-month improvement in the indicator. The increase far exceeded economists' expectations -- a panel of analysts surveyed by Briefing.com had forecast a 1% rise.

Pending home sales rose 3.2% in July.

Pending sales are considered a forward indicator of housing market health since contract signings precede actual closings, which typically occur two to three months later. August contract signings show up in October and November NAR statistics as existing home sales.

Housing markets have gained some ground recently as a tax credit for first-time homebuyers -- which is scheduled to expire Nov. 30 -- stimulated sales of starter, and other, homes.

"No doubt many first-time buyers are rushing to beat the deadline for the $8,000 tax credit, which expires at the end of next month," said Lawrence Yun, NAR's chief economist.

One problem in extrapolating future closings from contract signings, however, is that there are continuing problems obtaining mortgages that may scuttle many deals, according to Yun.

"The rise in pending home sales shows buyers are returning to the market and signing contracts, but deals are not necessarily closing because of long delays related to short sales, and issues regarding complex new appraisal rules," he said.

Those issues also could also lead to some double counting of previous pending sales as buyers whose earlier deals fell through may return to the market and sign new contracts.

Still, the oversized gain in pending sales will surely translate into some increase in closings, and the report added to several other positive recent indicators that housing markets are at least stabilizing, if not in full-blown recovery.

Not all economic and housing indicators have been pointing up. Initial jobless claims climbed this week, according to a Labor Department report, after three weeks of declines.

Foreclosure filings are still well above normal and they threaten to go far higher as the terms of many toxic mortgages, such as interest-only loans and option ARMS, reset over the next six to 12 months and send the monthly mortgage payments of homeowners soaring.

Another housing market question mark is the status of the tax credit for first-time homebuyers, with the industry fearing that home sales could drop sharply if it's allowed to expire.

There are, however, several efforts in Congress to extend the credit and even to expand it to all homebuyers, not just first-timers. That could turbo-charge home sales if it goes through. 

from cnn.com

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The director of the Real Estate Center at Texas A&M University said it appears Texas has reached the bottom of the housing market.

Mark Dotzour said the inventory of unsold new and existing homes around the state is in good shape.

"I feel now is the time to buy a house in most Texas cities," said Dotzour, in the center's online newsletter, RECON. "Housing affordability has never been higher, and I never thought I would see 5 percent mortgages in my lifetime. If you plan to live in the house for at least two or three years, now is the time to buy."

The economist also said the time is right to build a house because construction costs are low, mortgage money is cheap and there are plenty of contractors available to do the work.

Dotzour predicts mortgage rates will remain low as long as the federal government keeps purchasing most of the residential mortgages.

However, he said the housing recovery could be adversely affected by Washington's intervention in the areas of health care, taxation, cap and trade and the rewriting of accounting and legal standards.

 Austin Business Journal - by Jennifer Dawson Houston Business Journal

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FHA-approved lenders received the go-ahead to develop bridge-loan products that enable first-time buyers to use the benefits of the federal tax credit upfront, according to guidance from the U.S. Department of Housing and Urban Development on so-called home buyer tax credit loans that was released today.

Although the HUD guidance allows the bridge loans to be used in conjunction with FHA first mortgage financing, few lenders are expected to create bridge-loan products. There are a number of reasons for this. First, the loans must be structured as personal loans rather than as second mortgages or mortgage-backed lines of credit because of statutory restrictions. Second, the limited time-frame of the tax credit program--it's set to expire before Dec. 1 of this year--leaves little time for lenders to set up and operate programs profitably.

Given these limitations, despite the announcement by HUD, the best opportunity for buyers to leverage the tax credit for up-front assistance is through programs set up by some state housing finance agencies. About a dozen state housing finance agencies (public bodies that are instrumentalities of state government) have developed their own tax credit bridge loan programs, so buyers in states whose HFAs offer such programs can monetize the tax credit upfront to cover all or part of their downpayment.

Information on the state HFAs that offer tax credit bridge loans is available at the Web site of the National Council of State Housing Agencies.

FHA Guidance has Limited Scope

Under the guidance from HUD, FHA-approved lenders can develop bridge loans that home buyers can use to help cover their closing costs, buy down their interest rate, or put down more than the minimum 3.5 percent. The bridge loans must be structured as personal loans.

The loans can't be used to cover the minimum 3.5 percent, senior HUD officials told reporters on a conference call Friday morning.

Thus, buyers applying for FHA-backed financing with an FHA-approved lender that offers a bridge-loan program can get a bridge loan to bring down the upfront costs of buying a home significantly but would still have to come up with the minimum 3.5 percent downpayment.

The first-time homebuyer tax credit was enacted last year--and improved upon earlier this year--to help encourage households to enter the housing market while interest rates are low and affordability is high. The credit is worth up to $8,000 and is available to households that haven't owned a home in at least three years. The credit does not have to be repaid, and is fully reimbursable, so households can get their credit returned to them in the form of a payment.

Learn more about the credit, including how to apply for it this year even if you've already filed your taxes, at REALTOR.org.

Source: Robert Freedman, REALTOR® Magazine Online

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Daily Real Estate News  |  May 12, 2009  | 

Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, on Tuesday said that the Federal Housing Administration is going to permit its lenders to allow home buyers to use the $8,000 tax credit as a down payment.

Previously, most buyers wouldn't receive the funds until after they filed their tax return, and that deterred some people from using the credit. The NATIONAL ASSOCIATION OF REALTORS has been calling for the change.

"We all want to enable FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a down payment," Donovan says. His remarks came in an address to several thousand REALTORS gathered Tuesday morning at "The Real Estate Summit: Advancing the U.S. Economy," at the 2009 REALTORSR Midyear Legislative Meetings & Trade Expo in Washington, D.C.

He says FHA's approved lenders will be permitted to "monetize" the tax credit through short-term bridge loans. This will allow eligible home buyers to access the funds immediately at the closing table.

Other Solutions for Today's Market

During his address at the summit, Donovan went on to say that the Obama administration plans to further stabilize the housing market. "I do think we have some early signs that the market overall is stabilizing," Donovan says.

"Since January we've seen both home sales moving up and down around a relatively stable number and we are seeing the first signs that the rapid decline in home prices is starting to abate."

The morning session included a panel discussion that was moderated by CNBC's Ron Insana. Panelists examined cutting-edge solutions necessary to promote and preserve homeownership and real estate development, stimulate the economy, and protect the nation's taxpayers. They also shared their ideas on what the role and responsibility of the federal government is in the revitalization effort.

"Right now the Federal Reserve is the market," said panelist Jay Brinkman, chief economist for the Mortgage Bankers Association. "What will be the effect when the Fed stops buying?" Brinkman explained that an exit strategy must be planned for the long-term; the federal government cannot continue to support the mortgage markets indefinitely.

"We are thrilled that so many high-caliber individuals were able to join us today at this important meeting to promote stability in the housing market and the U.S. economy," said NAR President Charles McMillan. "We look forward to an ongoing dialogue and action toward this goal, during our midyear meetings this week and beyond."

The real estate summit is part of the 2009 REALTORS Midyear Legislative Meetings & Trade Expo. During the week ending May 16, more than 8,500 REALTORS attended meetings, visited lawmakers and inspired action on Capitol Hill.

 

Source: NAR

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IR-2009-14, Feb. 25, 2009 WASHINGTON - The Internal Revenue Service announced today that taxpayers who qualify for the first-time homebuyer credit and purchase a home this year before Dec. 1 have a special option available for claiming the tax credit either on their 2008 tax returns due April 15 or on their 2009 tax returns next year. Qualifying taxpayers who buy a home this year before Dec. 1 can get up to $8,000, or $4,000 for married filing separately. "For first-time homebuyers this year, this special feature can put money in their pockets right now rather than waiting another year to claim the tax credit," said IRS Commissioner Doug Shulman. "This important change gives qualifying homebuyers cash they do not have to pay back." The IRS has posted a revised version of Form 5405, First-Time Homebuyer Credit, on IRS.gov. The revised form incorporates provisions from the American Recovery and Reinvestment Act of 2009. The instructions to the revised Form 5405 provide additional information on who can and cannot claim the credit, income limitations and repayment of the credit. This year, qualifying taxpayers who buy a home before Dec. 1, 2009, can claim the credit on either their 2008 or 2009 tax returns. They do not have to repay the credit, provided the home remains their main home for 36 months after the purchase date. They can claim 10 percent of the purchase price up to $8,000, or $4,000 for married individuals filing separately. The amount of the credit begins to phase out for taxpayers whose adjusted gross income is more than $75,000, or $150,000 for joint filers. For purposes of the credit, you are considered to be a first-time homebuyer if you, and your spouse if you are married, did not own any other main home during the three-year period ending on the date of purchase. The IRS also alerted taxpayers that the new law does not affect people who purchased a home after April 8, 2008, and on or before Dec. 31, 2008. For these taxpayers who are claiming the credit on their 2008 tax returns, the maximum credit remains 10 percent of the purchase price, up to $7,500, or $3,750 for married individuals filing separately. In addition, the credit for these 2008 purchases must be repaid in 15 equal installments over 15 years, beginning with the 2010 tax year.

IR-2009-27, March 18, 2009

WASHINGTON - As part of the Treasury Department's consumer outreach effort and with the April 15 individual tax filing deadline approaching, the Internal Revenue Service today began a concerted effort to educate taxpayers about additional options at their disposal to claim the new $8,000 first-time homebuyer credit for 2009 home purchases. For people who recently purchased a home or are considering buying in the next few months, there are several different ways that they can get this tax credit even if they've already filed their tax return.

The Treasury Department encourages taxpayers to explore these options to maximize their credit and get their money back as fast as possible.

"The new credit can get money in the pockets of first-time homebuyers quickly," said IRS Commissioner Doug Shulman. "For people who recently purchased a home or are considering buying in the next few months, there are several different ways that they can get this tax credit even if they've already filed their tax return."

First-time homebuyers represent a significant portion of existing single-family home sales. The expansion in the first-time homebuyer credit will make it easier for first-time homebuyers to enter the housing market this year.

Under the American Recovery and Reinvestment Act of 2009, qualifying taxpayers who purchase a home before Dec. 1 receive up to $8,000, or $4,000 for married individuals filing separately. People can claim the credit either on their 2008 tax returns due April 15 or on their 2009 tax returns next year.

The filing options to consider are:

• File an extension. Taxpayers who haven't yet filed their 2008 returns but are buying a home soon can request a six-month extension to October 15.  This step would be faster than waiting until next year to claim it on the 2009 tax return.  Even with an extension, taxpayers could still file electronically, receiving their refund in as few as 10 days with direct deposit.
  
  
• File now, amend later. Taxpayers due a sizable refund for their 2008 tax return but who also are considering buying a house in the next few months can file their return now and claim the credit later.  Taxpayers would file their 2008 tax forms as usual, then follow up with an amended return later this year to claim the homebuyer credit.
  
  
• Amend the 2008 tax return. Taxpayers buying a home in the near future who have already filed their 2008 tax return can consider filing an amended tax return. The amended tax return will allow them to claim the homebuyer credit on the 2008 return without waiting until next year to claim it on the 2009 return.
  
  
• Claim the credit in 2009 rather than 2008. For some taxpayers, it may make more financial sense to wait and claim the homebuyer credit next year when they file the 2009 tax return rather than claiming it now on the 2008 tax return. This could benefit taxpayers who might qualify for a higher credit on the 2009 tax return. This could include people who have less income in 2009 than 2008 because of factors such as a job loss or drop in investment income.

The IRS reminds taxpayers the amount of the credit begins to phase out for taxpayers whose modified adjusted gross income is more than $75,000, or $150,000 for joint filers. Taxpayers can claim 10 percent of the purchase price up to $8,000, or $4,000 for married individuals filing separately.

IRS.gov provides more information, including guidance for people who bought their first homes in 2008. To learn more about the overall implementation of the Recovery Act, visit http://www.recovery.gov/.

Source: www.irs.gov/newsroom

 

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