Has the home buyer tax credit in California been extended?
Well, California’s real estate market did receive another boost from last night’s vote in the Senate. Although it’s not the final vote, it effectively seals the deal on the plan to extend the $8000 first time home buyer credit through April 30th 2010 as well as expanding the credit to move-up-buyers on a smaller scale ($6500).
Recently, Congress extended the California FHA Loan Limits that have been put in place to help more buyers and owners to take advantage of the record low mortgage rates.
First Time Home Buyer Tax Credit extension
+ Move-Up-Buyer expansion
+ FHA Loan Limit extension
+ Record Low Mortgage Rates
= Housing Recovery
Or does it?
The home buyer tax credit is extended to April 30th, 2010 and will end June 30th, 2010. A home buyer can get into contract by April 30th and then is given 60 days to complete the purchase transaction. Sounds great, but as many years as I’ve been in the business, April is the beginning of purchase season and things really heat up in June when schools let out for the summer. I’m sure this is all part of the strategy since we know that from April – September of any given year the majority of home sales occur. It’s like having Christmas stuff on sale in February – you really have to plan ahead.
The expansion to Move-Up-Buyers allowing $6500 more purchase power is a smart addition. However, the income cap of $150,000 for single filers and $225,000 for joint will help but not for all Americans.
FHA loan limits have been and always will be an issue for certain parts of California. Take Riverside County for example. The loan limit is $500,000 which is much better than $417,000, but what about parts of the desert like Palm Desert or La Quinta where the average 4 bedroom condo is well above $700,000. When there is a limit to a loan amount, property values can be suppressed. Sure the resurgence of the Jumbo market is helping here, but not all can afford 25% down.
Don’t get me wrong, I’m ecstatic about the loan limits remaining at their current levels, but I am a Libra, I balance both sides. While it does help many, it still hurts others whether we like it or not.
Okay, record low mortgage rates. I won’t go on a tangent here, but if you’re on the fence thinking it will get better – IT WON’T. Get off the fence, get approved for a loan and act accordingly. Enough said, right?
Where am I going with all this you ask?
I see additional assistance coming to the first time home buyer. Heck in 2009 we’ve seen 350,000 additional buyers come to the market and take advantage of the credit whereas without it, most likely these folks would remain renters. The majority of these buyers were on the mid to low end with the average purchase price well under $250,000. The expansion to the move-up-buyer is a step in the right direction, but we need to pay more attention to this arena.
The $250,000 – $500,000 range is under radar as the ‘next wave‘ of foreclosures could be on the horizon. Although the $6500 expansion will assist in mopping up some of this inventory, it will not solve the ongoing flood of homes that might be on the court steps in 2010-2011. Some say “what shadow inventory?” Only time will tell.
How about extending credit not by a check from the IRS, but from Fannie, Freddie or Ginnie in the form of a loan to homeowners that have had a short sale or foreclosure in the last 24 months? Currently, FHA requires 3 years from foreclosure and typically 3 from short sale before a borrower is allowed to apply for the next home loan. It’s longer within Fannie and Freddie’s guidelines.
Several of my clients still have employment, make decent money and can afford a home, just not the one they are in or were in – especially with the time bomb loans they got themselves into. The hand doesn’t need to reach into a pocket to reward them with a check for $6500, the hand needs to be extended out to them so they can get across the high water they are in. Just a thought.
What are your thoughts or ideas on the home buyer tax credit, loan limits and the expansion to move-up-buyers?
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