As we say good-bye to a year that was one of the worst for the financial and housing markets since the Great Depression, it is incumbent on us to try to find a silver lining.
What has 2008 left in its wake that may actually be helpful for new home buyers?
LOW INTEREST RATES
Since the Fed announced a plan to buy up to $500 billion of mortgage securities backed by Fannie Mae, Freddie Mac and Ginnie Mae interest rates have dropped to their lowest in 37 years.
The government's plan, which may continue to drive down mortgage costs, is to buy $500 billion in mortgage-backed securities by mid-2009.
Rates on a 30-year fixed-rate mortgage have dropped to an average of 5.10. The rate was 6.07% exactly a year ago.
The 15-year fixed-rate mortgage is averaging 4.83 percent, down from 4.91 percent and is the lowest rate since March 25, 2004.
Adjustable rates are also lower with the one-year adjustable at an average of 4.85 percent and the "5/1" ARM, set at a fixed rate for five years and adjustable each following year, averaging 5.57 percent.
FIRST-TIME HOMEBUYER TAX CREDIT
The Housing Assistance Tax Act of 2008, part of the housing bill signed into law on July 30, included a provision to help first time buyers.
Available for a limited time, the credit:
- Applies to home purchases between April 8, 2008 and July 1, 2009.
- Reduces your tax bill dollar for dollar.
- Is fully refundable, meaning that the credit will be paid to you even if you owe no tax.
How does it work?
The $7500 "tax credit" is actually an interest free loan from the government. The money will be given to you as a tax credit and you will the repay the loan over the next 15 years. With this program:
- You can receive 10% of the purchase price of your home, capped at $7,500 in the year that you buy.
- To qualify, your income must be no more than $75,000 single or $150,000 for a married couple filing jointly. Partial credits are available to those earning more.
What is the IRS's definition of a first-time home buyer?
A first time home buyer is one who has not owned a principal residence during the prior 3 year period. For married couples, you must both be first-time buyers. A home may include townhouses, condos, mobile homes and houseboats, as long as their will be primary residences.
How is the credit repaid?
The credit is similar to a 15-year interest free loan. It is repaid in equal annual installments beginning with the second tax year after the purchase of your home and is included on your income tax return. The payment on the full $7,500 credit would be $500 a year for 15 years.
A BUYERS' MARKET
A record number of foreclosures, short sales and unsold inventory have provided us with one of the largest buyer's markets on record.
Unhappy sellers who are competing with foreclosure properties and an overstocked market are being forced to lower their prices. With increased unemployment and a continuation of foreclosures, there are be plenty of deals to be had for home buyers this year.
If you are in the position of looking for a new home, align yourself with a knowledgeable buyer broker who is familiar with the area you are looking in and who has the experience necessary to help you to find the right house and negotiate a great deal in 2009.
Copyright 2009 - Claudette Millette, President, TheBuyersCounsel - 800-392-1446, E-mail
Ashland, Holliston, Hopkinton, Natick, Newton, Northborough, Framingham, Sherborn, Southborough, Sudbury, Wayland, Westborough
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