Stimulus bill stokes housing hopes

It has been justifiably argued that the new home purchase credits certainly will not help everyone and will actually compromise, even create a liability for others. The article below explores where you may stand in the big picture

r.rempfer 

Stimulus bill stokes housing hopes

A substantial tax credit for homebuyers in the recently passed $838 billion stimulus bill may be just what is needed to turn around the real-estate industry. But will the credit survive the House?

By Nick Timiraos, The Wall Street Journal

A tax credit for home purchases is raising the hopes of the real-estate industry, which believes the credit could be just the stimulus needed to stabilize the housing market and get hesitant buyers to take the plunge.

A provision included in the Senate version of the recently passed stimulus bill would provide a tax credit for 10% of the purchase price of a home, up to a maximum $15,000. The measure would have to win backing from the House, which voted to repeal a provision that requires an existing $7,500 tax credit to be repaid over 15 years. That credit, which has income limits, applies only to first-time homebuyers, who last year accounted for about 40% of all buyers, according to the National Association of Realtors.

The idea behind the broader Senate plan is to lure fence-sitting potential homebuyers like John Westerdale, a 47-year-old information-technology worker who has been shopping for a home for a year but has been reluctant to finalize a deal because of falling home prices. Sunday, he planned to visit a four-bedroom home listed at more than $500,000 in Ringwood, N.J., and said that if the credit is included in the final package, he’ll speed up his plans to make his first home purchase. The tax break, he says, could help offset the possibility of further declines in home values. “The problem is, if you buy a house you’ll have lost value in two months,” he says.

Economists say the credit could help buyers get over that worry. “This is triage,” says Mark Zandi, chief economist of Moody’s Economy.com. “We’re in a runaway elevator trying to put on the brakes … and this can help change the psychology in the marketplace.”

The National Association of Home Builders and the National Association of Realtors began aggressively promoting the tax credit last fall as part of a lobbying effort, which received a big boost when it was embraced by leading Senate Republicans last week. Congress last year approved the $7,500 credit for first-time buyers that had to be paid back over 15 years. But consumers weren’t excited about the plan, and housing executives say it didn’t spark many sales.

The current proposal has strong support from consumers. At real-estate firm Long & Foster Cos. in Chantilly, Va., Web-site traffic has increased fourfold over the past month and managers report a big uptick in interest from clients who want to go under contract if the tax credit is approved, says company President David Stevens. He sees the tax credit boosting sales among first-time and “move-up” buyers who have been sitting on the sidelines for years and could benefit from low home prices and interest rates.

Home repairs
A look at the differences between the House and the Senate tax credit provisions for homebuyers.

	House	Senate
Size of the credit	10% up to $7,500	10% up to $15,000
Who qualifies	First-time homebuyers	All buyers
How it works	The tax credit is refundable, which means that even buyers who don’t owe any federal income tax will receive a check. Modifies an existing tax credit to eliminate repayment provisions.	The tax credit is nonrefundable, which means that buyers can claim the credit only if they owe income taxes. Buyers can claim the credit on two years of tax returns.
Restrictions	Limited to singles who make $75,000 or less, and married couples who make $150,000 or less.	No income limits; primary residences only.
Price tag	$3 billion	$39 billion

Source: Joint Committee on Taxation

“Now is not the time to buy for everybody, but if you’re sitting on the sidelines expecting to wait longer to buy that perfect home … you have a layering of opportunity” if the tax credit passes, he says. Some economists say that without any effort to stimulate demand from buyers and eliminate a supply backlog, prices will continue to fall, triggering more defaults as more homeowners lose equity. That creates a self-reinforcing process, whereby banks that hold mortgage-related securities take more losses and tighten credit, slowing the economy.

Even some landlords, who could see their tenants leave to buy homes, support the approach to boost demand. “You need to get the housing market back on its feet because it’s dragging us all down,” says Richard Campo, chief executive of Camden Property Trust, a Houston-based apartment owner.

But the measure has its share of critics who say Washington shouldn’t be spending billions that largely benefit homeowners with equity in their homes, and upper-middle-income borrowers who have stable incomes and good credit. “The biggest beneficiary of this is whoever owns a home today at a price where they’re unwilling to sell,” says Thomas Lawler, an independent housing economist in Leesburg, Va. He and others say the real focus should be on stemming foreclosures, which are flooding the marketplace with price-destroying competition.

And because the Senate tax credit is nonrefundable, it wouldn’t benefit buyers who don’t owe any income tax or who have a low tax liability. About 38% of Americans owe nothing on their federal income taxes. “It’s basically a giveaway — an unnecessary windfall — to higher-income people,” says Sheila Crowley, president of the National Low-Income Housing Coalition.

Mounting job losses, rising credit-card defaults and tighter lending standards also could counter efforts to jump-start home sales. Jeff Jacobs says he is prepared to speed up his plans to move out of his Westerville, Ohio, condominium and into a larger home with his wife and 7-month-old daughter. But the 28-year-old urban planner isn’t sure he would be able to qualify for a loan after losing his job late last year, and he wonders if he could sell his three-bedroom condo. “If the credit comes along, maybe we could get some buyers in here,” he says.

International Real Estate

I just wanted to share this piece with everyone regarding International Real Estate

It is a global economy and a small world. Apathy can be costly no matter where you live. Don’t get caught sleeping while the boat ships out seems to be the message in the UK as well as the USA.

R. Rempfer

Confusion Reigns and April Showers

April is traditionally the month of rain showers in the UK. But the real estate industry is having trouble with another form of shower. Over on this side of the Atlantic the word ‘shower’ is also used to describe a group of hopeless or worthless people. So that would go for the bankers then, who are currently the biggest shower we have to contend with. They continue to stifle mortgage borrowing and throttle the market. Rather like in the States, the banks have readily taken money from the public purse yet still refrain from regenerating it as sufficient mortgage funds in the public interest.

But is the decline in the real estate market all down to the banks, and to our governments for that matter?

John Maynard Keynes, the brilliant economist, argued that governments should use fiscal and monetary measures to mitigate the adverse effects of economic recessions. They should also encourage the population to spend more to help stimulate the economy. As both the UK and the US governments currently seem to subscribe to this view we may soon know if Keynes was right. If he was then we may also receive the answer to the question many homeowners are anxiously seeking: when will the property market turn for the better?

But despite interventionist policies, Keynes may have also argued that it is the lack of movement in the real estate market today that is, in effect, causing diminution of equity – the very thing that homeowners fear most. This is a self-fulfilling prophecy: the fewer real estate transactions there are, the greater the loss in real estate values. This view would suggest that it is not solely up to governments to turn the tide of the property market, it is up to each and every one of us to get off the fence. If we start moving again we may see real estate values and equity rise. If we do nothing we will surely watch them fall. Like economies, real estate equity growth is aligned with confidence.

Of course Keynes had his detractors – many of them anxious to disprove the great man’s theories. Winston Churchill famously said of Keynes, “If you put two economists in a room, you get two opinions, unless one of them is Lord Keynes, in which case you get three opinions.”

But to be fair Keynes never saw this current market, although he did experience the Great Depression. He never had to grapple with financial institutions falling over themselves not to lend money despite the lowest interest rates ever. Nor did he need to ponder on the law of supply and demand in a property market which has precious little of either.

This is a perfect storm of lack of lending and lack of confidence. But the signs in the UK this spring add another dimension. Despite all the conflicting factors we have a market that is showing some very encouraging signs. Cash rich buyers and investors are suddenly re-entering the market in large numbers to take advantage of adjusted prices.

They feel we are nearer the end of this recession than the beginning, and understand that it is only a matter of time before prices stabilise and then begin to rise.

On this side of the pond, at least, the message to real estate buyers seems clear. Sit this one out now and the sitting could be costly. Get on and make the move into that investment, first home, larger family home or dream home and you may yet, in this month of April showers, be home and dry.

6 Signs of a Strong Housing Market

I wanted to share this article with everyone because I thought it had some important points. This article was written by Luke Mullins, U.S. News & World Report.

The real-estate meltdown means plenty of houses are available at bargain prices. But just because a house is cheap doesn’t mean it’s a good investment. Smart buyers will look for communities that can support long-term value.

1. A well-groomed neighborhood: Well-maintained homes and landscaping have a positive effect on property values in that community, says Joshua Dorkin, founder and CEO of BiggerPockets.com, a real-estate networking and information site. By caring for the appearance of their homes, residents help to create a more aesthetically pleasing environment that future real-estate hunters will want to buy into. So when you’re eyeing a home, make sure to take a drive through the entire neighborhood. Take note of how the neighbors care for their homes, lawns and gardens. “Run-down houses and abandoned cars are big red flags,” Dorkin says.

2. Good schools: Given the importance of education, communities located within strong school districts tend to support higher home prices. Parents, after all, will want to move into the communities with the best educational opportunities. “The school district is important in terms of increasing demand for that particular area,” says Richard Moody, chief economist at Mission Residential. Would-be homebuyers can determine the strength of a local school system by accessing online information from local governments or community Web sites, Moody says.

3. Low crime: Low crime rates also support strong home values. Since nobody wants to live in a neighborhood where they feel unsafe, crime limits housing demand in a given community. As a result, it’s important to obtain crime statistics for the neighborhood you’re considering moving into. The best way to do that, says Steve Dexter, a foreclosure expert and author of the book “Beat the Banks,” is to contact the local police department. “The police department is a public utility,” Dexter says. “Most medium- to large-sized [communities] have a public information [officer] that is dedicated to interacting with the public.” By contacting this office, home shoppers can get their hands on all the information they’ll need to determine a community’s level of safety.

4. Close to public transportation: Proximity to public transportation or commuter rail can also help boost home values, says Ron Phipps, a broker with Phipps Realty in Warwick, R.I. He says Americans are increasingly willing to pay a premium for properties that allow them to be less dependent on cars. “Access to bus lines and commuter rail lines is of huge value,” Phipps says. “The price of fuel is going to go up again and a lot of my clients are saying, ‘OK, how do we position ourselves to minimize that impact?’”

5. Favorable population trends: It’s also important to look at the population trends in the city you’re considering moving to, Moody says. “You want to see a track record of steady population growth, which supports growing demand for housing, which will in turn support rising home values,” Moody says. Such data can be found online at the U.S. Census Bureau, or through local county or township Web sites, he says.

6. Healthy employment landscape: Employment plays a key role in population trends, as workers migrate to locations where they can find jobs. Thus, a healthy employment outlook is a key component of a strong housing market. “If you are in one of these Upper Midwest cities and you’ve got layoffs, especially in a sector like automotives where the jobs are disappearing and they are not coming back, that is a huge problem,” Larson says. Home shoppers can obtain economic data from the local government or chamber of commerce, Larson says. Pay special attention to the unemployment trends and find out if any new companies are slated to move into — or out of — the area. “A lot of communities have been trying to attract the sort of economically insensitive industries like biotech and [pharmaceutical companies],” Larson says. “If you’ve got an area where that kind of business is being brought in — through tax incentives or other efforts — that would be a positive for your local area.”

Home Buyer Tax Credit