The 8,000 tax credit that has been instrumental to getting our customers in their new homes over the past year, looks like it will be extended.To find out more about the tax credit or buying or selling a property in the Chautauqua County area, please contact us at (716) 753-7880, nickholt@howardhanna.com, or visit or main website at http://www.howardhannaholt.com.Hellen Hanna was interviewed for the following article in the Pittsburgh Post Gazette, to view the entire article visit http://www.post-gazette.com/pg/09309/1010981-28.stm#ixzz0W1I3vsICFirst-time homebuyers who had been facing a Nov. 30 deadline to take advantage of a $8,000 tax credit offered by the federal government likely will get more time after the Senate approved an extension of the program yesterday by a 98-0 vote.
The extension proposal now goes to the House, where a vote could come as early as today. The bill, which includes 20 more weeks of unemployment benefits for the jobless and tax relief for struggling businesses, then would be forwarded to President Barack Obama for his signature.
Buyers had been racing to meet a Nov. 30 deadline, as those looking to cash in would have had to close on a home by the last day of this month. Under the extension plan, the tax credit would continue until April 30 and would be expanded to include people with higher incomes and some who already own homes. That would cost about $10 billion in the fiscal year that began Oct. 1, according to Congress's Joint Committee on Taxation.
Already though, the looming deadline had served the purpose of breathing life into a moribund housing market.
"The market has been in a frenzy pitch in the last six months as the program is running out," said Helen Hanna Casey, president of Howard Hanna Real Estate Services. She said this has been the company's best October in history. "We've seen a continual upswing."
The credit was intended to stimulate the real estate market by encouraging first-time homebuyers, but it has led to increased sales across the board.
"When we sell to a first-time buyer it frees someone who wants to move up," Ms. Casey said. "So, in the last three months we've seen an increase in sales in all price ranges because of this."
Data from West Penn Multi List for the month of October shows single-family home closings have increased 14 percent to 2,242 sales compared with October 2008, the number of homes under contract have jumped 35 percent to 3,623 and the average sales price in the Pittsburgh region is up 1.7 percent to $136,400.
Year-to-date sales in the greater Pittsburgh region, however, are down 6 percent from 19,388 sales in the first 10 months of 2008 to 18,204 sales so far this year. Industry insiders believe the lower sales figures could be due to buyer procrastination in the early months of 2009, and they say a more complete picture could emerge this month.
More than 1.4 million first-time homebuyers have taken advantage of the tax credit so far, according to the Internal Revenue Service. The credit is equal to 10 percent of the home's purchase price up to $8,000.
Claiming the credit is as simple as filling out a tax return.
"It's a refundable credit, so even if you don't owe any tax you get a check for $8,000," said Howard Davis, president of Davis, Davis & Associates, a Downtown accounting firm. "It's unbelievable. In my 30 years I've never seen anything like this. How long would it take the average person to save $8,000?"
Mr. Davis said first-time homebuyers who qualify for the credit could either include the purchase on their 2009 tax return or treat the purchase as if it occurred last year and claim the credit by amending their 2008 tax return.
To be considered a first-time homebuyer under this program, the buyer must not have owned a principal residence during the three-year period prior to the purchase. For married couples, that means unless both individuals qualify neither can receive the credit.
Income limits also apply. Under the extension approved by the Senate, individuals with annual incomes up to $125,000 and joint filers with incomes up to $225,000 qualify for the full credit. Individuals with incomes up to $145,000 and joint filers with incomes up to $245,000 qualify for reduced credits.
The credit does not have to be repaid unless the home is sold within 36 months of the closing date.
In 2008, Congress created a $7,500 first-time homebuyer tax credit, which went into effect April 8, 2008, and was set to expire July 1, 2009. But the problem with that program was that the credit had to be repaid over 15 years and thus was widely viewed as a debt rather than a benefit.
The newer version, which was signed by Mr. Obama in late February, but made retroactive to Jan. 1, 2009, removed the repayment requirement and expanded the credit to $8,000. It also still applies to homes purchased in 2008 under the original program.
"We've noticed over the last couple of months a number of homes we've had for sale have closed and more are under contract hoping to close by the Nov. 30 deadline," said Dick Charles, a broker and owner at ReMax South in Whitehall. "A good number of those sales have been first-time homebuyers. (The tax credit) has had an impact here."
Before yesterday's vote, lawmakers had faced pressure from real estate agents, mortgage brokers and homebuilders to extend the credit.
The extension, according to Walter Molony, a spokesman for the National Association of Realtors in Washington, D.C., would require homebuyers to have a contract in place by April 30, but they then would have 60 days to close on the house, which would give them until the end of June.
The bill also would extend the credit to existing homeowners for a lower dollar amount -- $6,500. Existing homeowners would have to have used their current home as a principal residence for at least five of the past eight years to qualify.
Cameron Findlay, chief economist for LendingTree.com in Charlotte, N.C., said the success or failure of the tax credit program will be regionalized because the impact of the $8,000 credit is greater in a state such as Pennsylvania, where homes cost less, than in California, where they are significantly more expensive. For the sake of comparison, Mr. Findlay said the average list price of a home in Pennsylvania is $286,000, while in California it's $716,000.
"This program is not targeted only for home sales, but to jump-start all industries tied to housing, such as lumber, roofing and labor," he said. "This will get the wheels turning in terms of homes being purchased and getting renters to buy.
"The benefit we see is hopefully some of the excess inventory will go down, which should stabilize prices," he said.
