With all the talk of the Stimulus and spending every waking hour studying the market, dealing with dozens of transactions and seeing firsthand some really cool things happening, I decided to list the top reasons to buy a home now.  Now, most of this is common knowledge, but there are a couple of interesting aspects of the Stimulus and the CA state budget that may have a profound effect on the housing market.  There are a few nuggets here and maybe something will ring true with you.  Let me also say I am NOT a CPA or tax professional so you should verify this information before acting. 

1.  We all know about the $8000 federal tax credit for first time buyers.  That is a good thing.  What you may not know about is the $10,000 CA tax credit for new construction.  If you are a first time buyer, and are buying a newly constructed previously unoccupied home, you can qualify for a tax credit of up to $18,000.  That is significant! 

There are some qualifiers with both so let's look a bit closer.  The $8000 credit is for qualified 1st time buyers.  There are income limitations...$75,000 for a single person or married but filing seperate tax returns, and $150,000 for married couples.  You must not have owned a home in the past 3 years, and you must occupy the property for two years after purchase as a primary residence.

The $10,000 new construction credit has no income limitations and you need not be a first time buyer.  The credit is applied over three years, and you must also occupy the home for two years after purchase as your primary residence.  There has been $100 Million allocated for this credit and it is first come first serve.  So once the money is gone, it's gone!  Many builders are also offering additional incentives.  We just closed on a home with Shea Homes in San Diego County and they offered a $20,000 incentive.  During escrow they offered an additional $5000 to help the buyer get out of a lease.  So there are deals on new construction out there!

2.  Reverse mortgages are now available on purchases!  Previously a reverse mortgage was only available to qualifying seniors on their current residence.  This is a fantastic opportunity for senior citizens to buy a new home and live mortgage payment-free without having to wait for their old home to sell.  The loan limits for FHA-insured reverse mortgages have been increased to $625,500 across the entire country-not just the higher cost areas. The previous limit was $417,000 across the country. 

This new plan allows seniors to now buy a new home using a reverse mortgage, making it easier to buy without selling.  Maybe you want to keep your old home and make it a rental.  Or maybe you want to wait for market conditions to improve before selling.  Think about the bigger picture of potentially renting your prior home, then using the 1031 deferred exchange plan to reinvest in another property and defer capital gains taxes.  Lot's of interesting strategies could come into play here.

3.  Expansion of Home Improvement Tax Credit.  The tax credit for making energy efficient home improvements is now 30% of the cost of the improvements up to a maximum of $1500.  This means that if the improvements cost you $4,500, you would receive a tax refund of $1,500 when you file your tax returns.  Eligible improvements include energy efficient exterior doors and windows, insulation, heat pumps, furnaces, central air conditioners and water heaters.  Since this is a buyers market, the cost of making these improvements can also be significantly less than just a year or two ago.  Many cities and states also offer rebates for making your home more energy efficient and of course your monthly bills can be reduced as you use less energy to run your home.

4.  $729,750 FHA and Conforming Loan Limits Restored in High Cost Areas.  The $729,750 maximum loan limit had been in force throughout 2008, but was reduced to $625,500 in 2009.  The economic stimulus plan restores the $729,750 maximum. This makes higher cost homes more affordable - especially in the coastal housing markets that tend to have higher than average home values.

5.  This last group of reasons have been in play for the past year or so but sometimes it helps to see it in black and white!  First, interest rates are at historic lows meaning your monthly payment will be less.  Your out of pocket acquisition costs may be less as many sellers, banks included, are offering credits for closing costs and lender fees.  There is a ton of inventory to choose from so your dream home is out there!  FHA loans still are available with 3.5% down and there are even renovation loans that allow you to finance the cost of any rehab into your loan and the bank appraises the property as if the improvements have already been done!  This let's you go after those run down REO's and feel good about it.  Investors can also own up to 10 properties and get FHA financing! 

Hopefully there is something in here that makes sense to you.  The bottom line is if you want a home for you and your family, plan to be there for 3, 4, 5 years or longer, you will see some equity.  And don't forget about the mortgage interest and property tax deductions you get as well.  All in all it is a great time to buy real estate and we'd love to be the company to help you do it!