First-time tax credit jolts housing market

Robert Wang

Dustin Brown didn’t plan on being a homeowner in 2010.

The 24-year-old Alliance man, who lives with his parents, had anticipated getting married this summer and moving into a rented apartment with his bride.

But when he and his fiancée heard last December about the federal government’s $8,000 refundable tax credit for first-time home buyers, they accelerated their plans to buy a home.

Fearing they also would miss out on ultra-low interest rates, they started aggressively viewing houses and checking listings on real-estate site, but they struggled to find a home in their price range. Finally, with the tax credit due to expire, the couple closed a purchase on a starter house in Jackson Township a week ago.

“To know that we have a place to call home, it’s a very satisfying feeling to have,” said Brown. “So definitely having that $8,000 tax credit spurred me to look a little harder and (buy) a house earlier.”

Real estate agents say that the expiring tax credit and a sense that low interest rates have bottomed have imbued buyers with a sense of urgency to close sales on homes whose values are already depressed, invigorating the local housing market.

“It’s kind of a mad rush right now for everybody to get that tax credit,” Joey Marino said earlier this week. Marino, a Realtor for Whipple Financial Services in Perry Township, added that his sales are 50 percent higher than a few months ago as home prices start to rise in the township areas outside of Canton. “I have people calling me, saying they want a contract by the end of April 30th. ... I’m selling a majority of my properties right now.”

Reasons for optimism

Bob Catlin, president of lender Signature Mortgage in Jackson Township, said his new home purchase business has risen 40 percent this month compared to April 2009, much of it due to the expiring tax credit.

“It’s been brisk. There’s no question about it,” said Catlin.

“Our showings have tripled,” said Linda DeHoff, president of DeHoff Realtors. “Our closings have tripled. We’re seeing a very active market.”

She said she’s seeing more sales of homes with values between $100,000 and $300,000.

“I think the market is doing better because the economy is doing better,” said Deborah Wilson, a Realtor with Cutler Realty. “Before, everybody was scared because ‘I’m not going to buy a house because I might get laid off.’ ”

She says she was able to schedule four viewings for a house within 10 days after it was put on the market.

However, despite the improvement, the number of home sales still is nowhere near the levels of 2005, real estate professionals say. It still is a buyer’s market. Those with poor credit and insufficient income still can’t get mortgages. And a down payment still is required. Loans insured by the Federal Housing Administration require a down payment of 3.5 percent.

Tax credit or bust

Rushing to beat the tax credit deadline, Amanda Tucke, 27, said she and her husband signed a contract last week to buy a two-bedroom brick bungalow in Jackson Township after an 18 month search for a new home.

Tucke said the couple, who live in a rented Perry Township house with their 2-year-old daughter, got the bungalow at a substantial discount below the asking price of $102,000 because it now is owned by the U.S. Department of Housing and Urban Development. The agency got the home, valued at $195,200 by the county auditor in 2006,  after the prior owner whose loan was guaranteed by the federal government went through foreclosure. They plan to use money from the tax credit to pay down credit card debt, but the purchase is contingent on the house passing inspections.

“If it falls through, we’re not looking anymore because the tax credit is done,” said Tucke.


In an attempt to bolster a collapsing housing market, Congress in 2008 authorized a first-time homebuyer credit of up to $7,500. But homeowners had to pay the money back to the government in 15 annual no-interest installments.

The federal stimulus package of February 2009 increased the amount to $8,000, set the credit to expire in December 2009 and didn’t require repayment unless the buyer moved out of the home within three years.

In November, Congress extended the credit until the end of April and added a “longtime resident” credit of $6,500.

The credits will come at a cost of further increasing the national debt. And Catlin says they’ll do little to help those who have lost their homes in foreclosure.

The question is whether demand for houses will continue to recover after the tax credits expire.

Catlin believes there will be an initial drop-off in sales, but the housing market will continue to improve afterward as buyers flock to make bids before an expected rise in interest rates.

“You missed a great opportunity, but at the same time, business will continue,” he said.

The Repository

About the credit

People can get the $8,000 refundable federal first-time home buyer tax credit if they have:

- Signed a contract to buy a home and live in for less than $800,000 by Friday and close the sale by June 30.

- Not owned a home during the past three years.

- Earned less than $125,000 this year as an individual or less than $225,000 as a couple. Credits are phased out for higher incomes.

- Those not eligible for the credit but have had the same primary residence for five straight years of the past eight years, can get a “long-time resident” credit of up to $6,500.

Source: IRS