Congress has extended and expanded the homebuyer tax credit. The modifications will become effective when President Obama signs the bill, which could occur as early as November 6, 2009.
I have received numerous emails and comments from readers who asked for me to report the changes to the First Time Homebuyers Tax Credit when they occurred, and the changes most likely will occur immediately. This post will review the changes and enhancements so you should be able to understand the new housing tax credit. I
The Obama Administration Says Buy A Home
Buy a house and you can take part in the Obama Stimulus plan. The Obama train is printing wheelbarrow loads of money for everybody who wants to buy a home now, not just first timers! So, how does this all work?
The $8,000 homebuyer tax credit for first-time buyers, due to expire November 30, 2009, will be extended through June 30, 2010. First-time buyers who are in the process of making a purchase will no longer need to worry about qualifying for the $8,000 credit if they close after the November 30 deadline. The new legislation increases the income limit for couples with income up to $225,000, roughly a $55,000 increase above the level in existing law.
For the first time, the new legislation states that buyers who already own a home are eligible for a credit. A $6,500 maximum credit will be available to existing homeowners who have lived in their current residence for five of the prior eight years. The legislation limits eligibility for the existing homeowner credit to homes worth $800,000 or less.
The Tallahassee Real Estate Blog regularly reviews Tallahassee neighborhoods in order to get a feel for what home values are doing. You can click any one of the links in the right side bar (see pictured on the right) for a list of any blogs when the corresponding neighborhood in Tallahassee is mentioned.
When we last looked in on Killearn Lakes Unit 1, we noted that the home prices were holding fairly steady, though values (when looked at price per square foot) were falling. This told us that people who were buying a home in Killearn Lakes Unit 1 were buying larger homes, making the market look stronger than it appeared in standardized real estate reports.
Killearn Lakes (Unit1) Home Values
Home values continue to fall in Killearn Lakes (Unit 1). The best way to track real estate appreciation (or real estate depreciation) across a single Tallahassee subdivision is to track resale price per square foot data on a one-year trend.
The following real estate graph shows that the average number of homes selling in Killearn Lakes (Unit 1) each month has dropped below 2 per month (from a peak of nearly 5 home sales each month), and the average price per square foot of a home has dropped below $120 per square foot.
Remember, using the average price per square foot is an excellent way to track area home valuations over time, but it by no means is an accurate way to determine a home’s value. Killearn Lakes (Unit 1) features many different types of homes sitting on different types of home sites.
Some homes in Killearn Lakes (Unit 1) are on water front lots, while others are on the interior. Some have additional features such as swimming pools and multi-car garages. An individual home valuation must consider all of the differences, not just heated and cooled square feet.
Average Home Prices In Killearn Lakes (Unit 1)
Many real estate reports feature average home prices in an area. This is good to know if you are considering buying a home in an area such as Killearn Lakes (Unit 1), but it by no means an accurate depiction of true real estate depreciation (or appreciation).
The real estate graph above shows that the average home price in Killearn Lakes (Unit 1) did not start dropping until late in 2008, well more than a year after the rest of the Tallahassee real estate market. What we found in our previous analysis of Killearn Lakes Unit 1 was that buyers were selecting the larger homes when buying in this neighborhood.
This meant average home prices looked to be staying the same, while our average price per square foot report showed that homes in Killearn Lakes (Unit 1) were depreciating at a rate consistent with the rest of the Tallahassee housing market.
For those of you who like to carry a one-page summary of the current supply and demand report for Tallahassee housing, you can download this report from the right sidebar of the Tallahassee Real Estate Blog. It looks like the picture on the right and you only need to click the top link. Every month I post the updated report at this location.
Relative Home Supply Dropping!
As we have discussed often in the past, there exists a glut of homes for sale in Tallahassee. The Home Inventory Reports tell us not only how many homes are available (real home supply), but they also show home availability in terms of months of supply (relative home supply).
Both real and relative home supply dropped again during the month of October by just over 1/2 months of supply. Currently, Tallahassee has 13.7 months of supply of homes (more than double a market at equilibrium).
Buyers’ Market Continues In Tallahassee
This tells us that while still a very strong home buyers’ market, we are seeing improvement in the number of homes for sale in Tallahassee. [click for housing supply and demand graph…]
Like many people who live in Killearn Lakes Plantation, I’ve discovered a great little neighborhood (56 homes) that joins Killearn Lakes to Bannerman Road. It’s called Sable Chase and it is relatively new, with new home sales that started just five years ago.
Unlike some of the larger subdivisions in Tallahassee for which we report, Sable Chase has fewer than 1 home sold each month, so the trends are not as clear to see. The key to trend reporting is to have enough sales (liquidity) that you can draw clear conclusions from the data. With fewer than 1 sale per month, we see quite a bit of “noise” in the data.
In the real estate graph above, the vertical blue bars show the average number of homes sold in Sable Chase each month, while the red field represents the average price trend. Like most neighborhoods in Tallahassee, Sable Chase home prices have been on a steady decline since the top of the market.
Sable Chase Home Values Dropping
In order to get a feel for the level of depreciation in Sable Chase, we look at the overall average price per square foot of arms-length existing home sales. We can see that the peak of the market enjoyed home values that exceeded $150 per square foot, but recently, prices have trended down to $125 per square foot. This seems consistent with many other areas which have seen similar drops.
Do you remember when you were growing up and falling down all the time, Mom would put a band aid on your fleshy scrape to keep it from getting infected. That band aid made you feel really good, but it came with a price.
Removing a band aid from a messy wound is not a pleasant experience. There are two schools of thought on how to remove the band aid:
Take your time – Be very slow, gently trying to “peel” it away from the would without damaging new skin or pulling hairs out.
Grip it and rip it – Get hold of a tiny corner, count out loud from 1 to 3, then violently pull the band aid away from the wound in a nano-second.
Both ways cause pain, but most would argue that the latter produces better results (less pain and shorter recovery period).
The Real Estate Market Is In A Scrape
So why does somebody who writes a blog about real estate start a discussion about band aid removal? Great question … and the answer is because it was the best analogy that I could come up with to describe what is going on between our politicians and our wayward real estate market.
If you were paying attention on Friday, you might have heard that Senators reached a compromise to extend the $8,000 first time home buyer tax credit. They also added a $6,500 tax credit for other primary-home purchasers and raised the qualifying income limits to $125,000 for single taxpayers and $225,000 for joint taxpayers, housing-industry sources said.
Under this proposal, home buyers will have until June 30 to go to close on their purchases. But this is not a “done deal,” as the measure still faces votes in the full Senate and the House.
The Treatment For A Broken Real Estate Market Is “More of the Same?”
Albert Einstein’s definition of insanity: “Doing the same thing over and over again and expecting different results.”
Congress’s Solution to our housing market woes: Create unfunded financial incentives to propel the market beyond the extent to which it could perform under normal market conditions.
Hey, WAIT A MINUTE, isn’t this how we got here in the first place. Didn’t we (the government) push to achieve results in home ownership rates by creating loan programs for consumers who historically had a high rate of default? Didn’t this stimulate home-buying to such an elevated level that we produced significantly more homes than we needed?
Then, rather than see the good times come to an end, didn’t the mortgage industry create even crazier loan schemes to keep the good times rolling?
Tallahassee has quite a few golf courses and most of them have neighborhoods that are built around and through the golf courses. In the northeast quadrant of Tallahassee, you can find the Summerbrooke neighborhood which is also built around a locally developed golf course.
The Tallahassee Real Estate Blog often visits Summerbrooke in order to keep our readers informed of the activity in the housing market. As we have seen (and reported) in the past, Summerbrooke home sales continue to be affected by the market as much as any other neighborhood in Tallahassee.
Summerbrooke Home Sales Stabilizing At 2 Per Month
When we measure the trend of recent home sales in Summerbrooke, we can see the market has plummeted 63% from the peak when more than 6 resale homes per month were selling. It appears as if the Summerbrooke housing market has stabilized at about 2 homes selling monthly.
The average home price in Summerbrooke has dropped 20% since the peak of the market. The red shaded area in the real estate graph above shows how rapidly average home prices rose, and how they have come back about 1/3rd of the way.
Home Values Continue Dropping In Summerbrooke
When we look at the average price per square foot of homes sold in Summerbrooke, we get an overall feel for how well home values have held. Valuations appear to have fallen roughly 16% since the peak of the market in 2006.
Every time I do a Tallahassee neighborhood report featuring Piney-Z, it seems like my comments and email go from positive to negative. I have even been accused of “bashing” the Piney Z Subdivision (as if I hold a grudge against a community???).
Certainly, that is not the case. Piney Z is a very desirable neighborhood located in Northeast Tallahassee, with home prices about 20% above the median for our county. I try to do regularly updates for many of the more active neighborhoods in Tallahassee, and Piney Z falls into this category.
Monthly Resales Stabilizing In Piney Z
This first real estate graph features existing home sales (resales) in Piney Z, with all of the non “arms length” sales removed. It is the clearest reflection of regular market activity in the past. When you look to the base of the graph, you will find that I am not using information from the Tallahassee MLS, rather I am reporting on all of the sales in the Piney Z neighborhood.
What this graph is showing is that unit sales in Piney Z (vertical blue bars) have dropped roughly 70% since the peak of the market, but monthly sales seem to be stabilizing around 3 resales per month since July of 2008.
As a reminder for those who subscribe to the Tallahassee Real Estate Blog by email, some embedded pictures and videos might not be appearing in your email and you might need to click the title header to go to your browser where all will be visible. Additionally, if you would like to respond (leave a comment) to this article, you will need to “click through” to the blog site to post your feedback.
Joe Manausa is a real estate blogger, a real estate investor and the Broker and Co-Owner of Century 21 First Realty. He can be reached via e-mail through the Tallahassee Real Estate Website or catch his latest writings on the Tallahassee Florida Real Estate Blog , or by calling (850) 386-2001.
I am always looking for ways to discover earlier signs of impending movements in the Tallahassee real estate market. The key to forecasting the future is knowing the “natural order of things” and then looking for the first signs of the first steps in the process.
The best forecasters build models, based upon the end-state that they are seeking, and them work them backwards, always seeking for clues of earliest signs. For example, we could create a simple model like this:
Home Sales In Tallahassee
This shows the hierarchy of what must occur for us to see a turn in the housing market. We are seeking year-over-year increases in home sales. Currently, our housing market activity roughly down 34% from where it “normally” is and over 60% down from the top of the market. The following real estate graph of historical “Daily Buyer Activity” shows we are:
The left scale shows the average number of homes sold in a day in the Tallahassee MLS is currently around 6.0, but it has been as high as 16! We want our forecasting model to tell us what is going to happen next, so looking at the model, our next exam should focus on pending home sales in Tallahassee.
Anybody who knows me will tell you that I am an Army Football fan. I played for Army in the 1980s and I attend their annual football team reunion up at the academy each year.
Recently, I had a conversation with a friend who is also a fan, but is (I believe) a little biased when reporting how well a team with a 3-5 record is really doing.
Army played Rutgers this past Thursday night, but I did not watch the game. The next morning I read that we had lost the game, so I called my friend to see how the team had performed.
Our Conversation
Me: So did you watch the game?
Him: Yes! Man we had it right in our hands.
Me: Really?
Him: Yeah, we really looked strong. We took the opening drive and shoved it right down their throat. We ran 11 plays and scored a touchdown. We were dominating.
Me: Oh? What happened after that.
Him: Well, Rutgers ran off 17 straight points and then scored the final 10 points of the game to beat us 27-10.
Now I wouldn’t call his recollection of the game a true, un-biased account. I’m not so sure that Army “had it right in their hands.” I’ve learned over time that if I really want to know how well (or how not-so-well) the Army Team has done, I need to read a few different accounts from the game. Everybody has their own viewpoint, and all come will a bias.
Beware Of False Prophets In Real Estate
So why do I begin a real estate blog with a story about Army Football? Because home sales in Tallahassee are a lot like the Army Football Team. There is a lot of talk and great signs of promise, but so far the record indicates that a recovery has not been made!
Recently, a local publication took a report from the Florida Association of REALTORS® and wrote an article that I think painted a picture that is not truly accurate. Much like my friend reporting on Army Football, the writer spouted a few positive (facts) and then let the reader conclude that the Tallahassee housing market is on the upswing.
Unfortunately, REALTORS® typically only report about 1/2 to 1/3 of all the home sales in a market. I like to know what the REALTOR® reports are saying, but to get a true picture of the Tallahassee real estate market (or any real estate market for that matter), one has to dig deeper.
Many home owners are stuck with a home that they cannot (or will not) sell in today’s market of falling home prices. They are looking for creative solutions and we have written many articles in the past about creative solutions to today’s real estate problems.
Today’s home selling solution is a bit “out there” because it won’t be for everybody and it is restricted to people who have a fairly healthy stock portfolio. But even if these constraints don’t fit your problem, this will still be a healthy read because the same creative process might help you find a solution to your current housing problem.
Consider A HedgeLoan To Replace Your Mortgage
One of the traps that people [who own a home that they do not want to own] find themselves struggling against is a fixed mortgage amount secured by a falling-value home. The amount of the loan remains relatively unchanged while the value of the collateral is falling. Imagine if they could change the collateral from the home to something with less risk for the homeowner.
Enter the Hedgeloan. This is a loan product that does not require a lien on your home, but rather uses the value of your stock portfolio (or a portion of it) as collateral. What makes it so great is that once in place, if the value of your portfolio falls, you have the option to surrender your portfolio as full satisfaction for the loan. It’s like giving your home back to the bank, without the negative credit ramifications that come with it.
How Does The Hedgeloan Work
A Hedgeloan can be used to borrow money for any reason. I have written this to demonstrate how using a Hedgeloan could help a frustrated homeowner satisfy a home mortgage and give the homeowner more flexibility in handling the disposition of the home. But how does a Hedgeloan work exactly?
Your stocks or other option-able securities remain in your own account and title at the well-known, major, SIPC-member U. S. brokerage/banking firm that the Hedgelender has arranged for your account. All of the normal rights and privileges of a conventional regulated U.S. brokerage account are provided, along with the services of a licensed account adviser. Your loan documents are delivered to you by the Hedgelender, as are your account statements. The loan is put in place when you sign your loan agreement and agree to a common lien on your securities until the loan is paid off.
Imagine If You Hedged Two Years Ago
How many times have you said “If only I had ….” Well, if you had taken out a Hedgeloan two years ago, most likely the value of your portfolio would have dropped far greater than the loan-to-value that you made against it. This would have given you quite a hedge against the drop of the stock market in 2008. For somebody with a million dollar portfolio, this could have meant a savings (less losses) of over $100,000!
Use A Hedgeloan To Replace Your Home Mortgage
By using a Hedgeloan to replace your mortgage, you will no longer have a mortgage lien against your home. This allows for you to be much more creative in the sale of your home. It also makes your home far more sale-able, as many potential buyers cannot purchase a home with conventional bank financing anymore.
Your freedom from a mortgage lien could allow you to provide full or partial owner financing, as well as structure a long or short-term lease purchase for a qualified buyer. The key is flexibility, which is critical for homeowners with expensive homes.
Find Out More About Getting A Hedgeloan
If you think you might be a candidate for a Hedgeloan, here is what I recommend you do:
I think with proper due-diligence, many high-end homeowners (or people with large stock portfolios) will find an interesting alternative to their current financing situation. The flexibility that a free-and-clear property provides could very well be the difference between selling a home in this market, and having to hold on to it for quite some time.
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
Congress has extended and expanded the homebuyer tax credit. The modifications will become effective when President Obama signs the bill, which could occur as early as November 6, 2009.
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