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Three GOOD Reasons to Buy a Home This Year

By
Real Estate Agent with eXp Realty - Urban Nest Real Estate Group GA# 305421

First time home buyer incentives - Buy a home in Atlanta Georgia

Many home buyers are still on the fence -- waiting for another tax incentive and/or for home values to decline even further.  Most likely there will not be another tax credit AND we won't know if we've reached the bottom of the market until after already happened and home values are on the rise.

Here are three good (excellent, actually) reasons to purchase a home:

  • Interest Rates are low, low, low --  rates have been at 4.75% or less
  • Home prices bottomed out in many of the Metro Atlanta real estate markets, and many sellers are VERY motivated to sell
  • Downpayment minimum is only 3.5% of the purchase price

If you are disappointed that you missed the first-time home buyer incentives, take a look at the following chart.  Interest rates are down almost 1.0% from April (when the home buyer incentive expired), which will save you more than $100 per month on a $200k mortgage.  Over the long term, it can save you tens of thousands of dollars.

 First time home buyer incentives Georgia

 

If you have any questions about the home buying process in Metro Atlanta, we're here to help! 

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Posted by:  Kerry Lucasse - Atlanta GA Real Estate Agent - Atlanta Home Search Team
The ATL Home Search Team is part of Keller Williams Realty

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Kerry Lucasse  ::  eXp Realty ::  Urban Nest Atlanta Real Estate Group

Call anytime @ 404.432.1844

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In & Around Atlanta Real Estate Blog - Copyright 2006 - 2020 by Kerry Lucasse and the Urbanest Real Estate Group with eXp Realty LLC in Atlanta, GA.  All information contained in this blog is deemed to be reliable but not guaranteed.   If you need assistance with Intown Atlanta real estate, Kerry Lucasse and her team are always available to assist you with your residential real estate needs!

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Real Estate News & Local Events

Patrick White
Home Driven Realty, Inc - Baldwin, NY
Driven to bring New Yorkers home

Hi Kerry

Thanks for the information. Have a great week.

Aug 29, 2010 02:54 PM
Bill Lumpp
Century 21 The Combs Company - Rocky Mount, NC
Realtor, GREEN

Great Flyer! Good information and very clear. Thanks for sharing

 

Bill

Aug 29, 2010 03:01 PM
Kerry Lucasse
eXp Realty - Urban Nest Real Estate Group - Atlanta, GA
Your Urban Nest Atlanta Real Estate Consultant

Patrick and Bill -- Thanks for stopping by!  I really hope buyers understand that a 1% decrease in interest rates is going to make a BIG BIG BIG difference long term.

Aug 29, 2010 03:12 PM
Mel Ahrens, MBA, Kelly Right Real Estate
Kelly Right Real Estate - Hood River, OR
Customized Choices for your Real Estate Needs

The interest rate decrease is absolutely going to be a big money saver over time.  The longer they are in the house the more money saved on interest expense. 

However, I believe the example you cited (from the Denver Post - here is the link to the article) is too simplistic.  Reducing the interest amounts paid over the term on the loan by the tax credit 30 years earlier does not factor in the compounded earnings of receiving the $8k thirty years earlier.  

Investing the $8k in tax free 30 year Treasuries on April 30, 2010 would yield a return of 4.53%.  At the end of 30 years that is $22,220 of earnings to offset the interest expense paid. That does not include the $8k.

Interest expense is also deductible on your tax return, subject to limitations.  Assuming the limitations do not apply (it applies only for a small portion of taxpayers), there is a $39,160 tax benefit, at a 25% marginal tax rate.   

Loan in April with $8k tax credit:         Interest costs of $156,644 less $22,220 (earnings on $8k of 30 year Treasuries) plus the tax benefits of $39,160 means a cost of $95,260.  And it is also reduced by the $8k received in 2010 for a real cost of $87,260.

Loan in Aug with lower interest rate:    Interest costs of $129,119 with taxable benefits of $32,280 for a real cost of $98,839.

Conclusion 1:    Over a full term of the loan, the person receiving the tax credit is better off after recognizing the earnings from investing in tax free Treasuries.

This too is probably overly simplistic as most people do not invest in tax free treasuries.  A more likely scenario might be investing in the stock market.  Over the long term (30+ years for comparability), the average before tax return from the stock market has been 8-10%.  Assuming an 8% return, there are total earnings of $72,500.  This is taxed at the marginal rate of 25% ($18,125) reducing the after tax earnings to $54,375.  This is an additional benefit of $32,155 over the Treasuries example making the real cost for the person receiving the credit $55,105.  That means the person missing the tax credit but getting the lower interest rate "paid" $40,155 (72% more!) more in real costs than the buyer receiving the tax credit.

Conclusion 2:     I'd rather have the tax credit. Now I can refinance and get the lower interest rate too. 

If you made it through all the numbers and arrived here - all of the above is most likely not going to happen.  Very few people actually keep their 30 year mortgage; most have an earlier time horizon.  It could be interest rates are lower and they refinance, or they move or ....... Life "happens" over 30 years.

The above analysis does not incorporate the present value of money, which brings all of the money streams back to a common point.  No, I won't have you go through that analysis.

Final conclusion:

Be careful/skeptical of overly general and simplistic "news" in the business section.  Real life is a lot more complicated than a lowest common denominator news article.

Aug 31, 2010 02:25 AM
David Popoff
DMK Real Estate - Darien, CT
Realtor®,SRS, Green ~ Fairfield County, Ct

Mel's comment definitely makes one think, reminds me of my old professor and all his theories, but he is right one .... always do your own research for your individual situation.  Thanks for the blog.

Sep 01, 2010 10:54 PM