Final Score: $8,000 for Homebuyers
By Les Christie, CNNMoney.com staff writer
First-time purchasers get a tax credit windfall if they buy before December.
NEW YORK (CNNMoney.com)
There's a nice windfall for some homebuyers in the economic stimulus bill signed into law this week by President Obama. First-time buyers can claim a credit worth $8,000 - or 10% of the home's value, whichever is less - on their 2008 or 2009 taxes.A big plus is that the credit is refundable, meaning tax filers see a refund of the full $8,000 even if their total tax bill - the amount of witholding they paid during the year plus anything extra they had to pony up when they filed their returns - was less than that amount. But there has been a lot of confusion over this provision.
Adam Billings of Knoxville, Tenn. wrote to CNNMoney.com asking:
"I will qualify as a first-time home buyer, and I am currently set to get a small tax refund for 2008. Does that mean if I purchased now that I would get an extra $8,000 added on top of my current refund?"The short answer? Yes, Billings would get back the $8,000 plus what he'd overpaid. The long answer? It depends. Here are three scenarios:Scenario 1: Your final tax liability is normally $6,000. You've had taxes withheld from every paycheck and at the end of the year you've paid Uncle Sam $6,000. Since you've already paid him all you owe, you get the entire $8,000 tax credit as a refund check.Scenario 2: Your final tax liability is $6,000, but you've overpaid by $1,000 through your payroll witholding. Normally you would get a $1,000 refund check. In this scenario, you get $9,000, the $8,000 credit plus the $1,000 you overpaid.Scenario 3: Your final tax liability is $6,000, but you've underpaid through your payroll witholding by $1,000. Normally, you would have to write the IRS a $1,000 check. This time, the first $1,000 of the tax credit pays your bill, and you get the remaining $7,000 as a refund.To qualify for the credit, the purchase must be made between Jan. 1, 2009 and Nov. 30, 2009. Buyers may not have owned a home for the past three years to qualify as "first time" buyer. They must also live in the house for at least three years, or they will be obligated to pay back the credit.
Housing bust is a boon: Dream homes are now affordable
10 easy ways to green your home
Additionally, there are income restrictions: To qualify, buyers must make less than $75,000 for singles or $150,000 for couples. (Higher-income buyers may receive a partial credit.)Applying for the credit will be easy - or at least as easy as doing your income taxes. Just claim it on your return. No other forms or papers have to be filed. Taxpayers who have already completed their returns can file amended returns for 2008 to claim the credit.
Lukewarm reception
The housing industry is somewhat pleased with the result because the stimulus plan improves on the current $7,500 tax credit, which was passed in July and was more of a low-interest loan than an actual credit. But the industry was also disappointed that Congress did not go even further and adopt the Senate's proposal of a $15,000 non-refundable credit for all homebuyers."[The Senate version] would have done a lot more to turn around the housing market," said Bernard Markstein, an economist and director of forecasting for the National Association of Homebuilders (NAHB). "We have a lot of reports of people who would be coming off the fence because of it."Even so, the $8,000 credit will bring an additional 300,000 new homebuyers into the market, according to estimates by Lawrence Yun, chief economist for the National Association of Realtors.The credit could also create a domino effect, he said, because each first-time homebuyer sale will lead to two more trade-up transactions down the line. "I think there are many homeowners who would be trading-up but they have had no buyers for their own homes," Yun said.Who won't benefit, according to Mark Goldman, a real estate lecturer at San Diego State University, are those first-time homebuyers struggling to come up with down payments. The credit does not help get them over that hurdle - they still have to close the sale before claiming the bonus.One state, Missouri, is trying to get around that problem by creating a short-term loan on the tax credit of up to $6,750. The state would loan borrowers the money so they could use it at closing as part of the downpayment. Then, when the buyers receive their tax credit from the IRS, they pay back the state. Other states may follow with similar programs, according to NAHB's Dietz.Many may look at the tax credit as a discount on the home price, according to Yun. A $100,000 purchase effectively becomes a $92,000 one. That can reassure buyers apprehensive about purchasing and then watching prices continue falling, he added.And it provides a nice nest egg for the often-difficult early years of homeownership, when unexpected repairs and expenses often crop up. Recipients could also use the money to buy new stuff for their home - a lawnmower, a rug, a sofa - and, in that way, help stimulate the economy.
Friday, February 20, 2009
Tuesday, February 10, 2009
Economic Stimulus Bill
A $15,000 homebuyer tax credit, higher loan limits for Fannie Mae, Freddie Mac and FHA, and government spending to lower mortgage rates are all in play as Congress and the Obama administration near agreement on an economic stimulus bill and financial stability plan for banks.
The Senate today approved an $838 billion economic stimulus bill that includes a $15,000 homebuyer tax credit, just hours after President Barack Obama's new Treasury secretary unveiled a multitrillion-dollar financial stability plan that includes $50 billion for foreclosure prevention programs.
The financial stability plan may also lead to an expansion of existing efforts by the Federal Reserve to drive down mortgage interest rates by buying mortgage-backed securities and debt issued by Fannie Mae, Freddie Mac and Ginnie Mae.
The version of the economic stimulus bill passed by the Senate in a 61-37 vote relies less on government spending and more on tax cuts to kick-start the economy than the version passed by the House Jan. 28 (see story). Only two Republicans voted for the bill in the Senate -- Sen. Arlen Specter of Pennsylvania and Maine's Olympia Snowe -- and all 37 "no" votes were cast by members of the Grand Old Party.
Differences between the two versions of H.R. 1, the American Recovery and Reinvestment Act of 2009, must now be ironed out in a conference committee.
The House version of the bill would restore the upper limits for Fannie Mae, Freddie Mac and FHA loan guarantee programs to $729,750 in high-cost housing markets, where they stood for much of 2008 before being reduced to $625,500 -- a step endorsed by many real estate industry groups.
The House version of H.R. 1 also contains another provision backed by the housing industry -- elimination of the repayment requirement on an existing $7,500 tax credit for first-time homebuyers that is scheduled to sunset on July 1. But the Senate version of H.R. 1 would go farther, increasing the tax credit to $15,000 and allowing all homebuyers purchasing a principal residence within a year of the bill's enactment to claim it on their 2008 or 2009 returns.
The National Association of Home Builders welcomed the Senate's move, saying a $15,000 tax break for all homebuyers could generate nearly 500,000 home sales and create more than 255,000 jobs.
NAHB Chairman Joe Robson said the enhanced tax credit would be "a powerful incentive for homebuyers to get off the sidelines" and urged Congress to make sure the full $15,000 tax credit is included in the final stimulus plan.
In a separate development, Treasury Secretary Timothy Geithner today released details of the Obama administration's new financial stability plan, a successor to the much maligned Troubled Asset Relief Program (TARP).
Geithner said the financial stability plan will include a comprehensive housing program that will provide $50 billion for foreclosure prevention programs. In order to persuade Congress to release the second half of $700 billion in TARP funding, the Obama administration had previously committed to spend $50 billion to $100 billion on a "sweeping effort" to address foreclosures (see story).
Geithner also alluded to a possible expansion of a $600 billion Federal Reserve program to drive down mortgage rates through the purchase of mortgage backed securities and debt issued by Fannie Mae, Freddie Mac and Ginnie Mae (see story).
Further details of the housing program will be announced in coming weeks, Geithner said. According to a fact sheet issued by the Obama administration, the Treasury and Federal Reserve "remain committed to expand as necessary the current effort by the Federal Reserve to help drive down mortgage rates."
The housing program will also establish loan modification guidelines and standards for government and private programs, and require all institutions receiving assistance through the financial stability plan to participate in foreclosure mitigation plans. The Obama administration will also build additional flexibility into the FHA's Hope for Homeowners refinance program to enable more distressed borrowers to participate.
While the main goal of the stimulus bill is to create jobs, the financial stability plan is designed to strengthen banks and restart the flow of credit to homeowners and small businesses, Geithner said. Currently, the financial system is working against recovery, even as the recession puts greater pressure on banks, he said.
"This is a dangerous dynamic, and we need to arrest it," Geithner said. The battle for economic recovery must be fought on two fronts -- by jump-starting job creation and private investment, and by getting credit flowing again to businesses and families.
As it has done under the TARP program, the Treasury will continue to invest in banks that need additional capital, but will now impose conditions to ensure "every dollar of assistance" is used to generate additional lending, Geithner said.
In addition, the Treasury, Federal Reserve and Federal Deposit Insurance Corp. will establish a $500 billion Public-Private Investment Fund to buy up toxic loans and assets. The fund could ultimately provide up to $1 trillion in financing, Geithner said, helping to create a market for real estate-related assets that are "at the center of this crisis."
The Treasury and Federal Reserve will also commit up to $1 trillion in backing for a consumer and business lending initiative, building on the Federal Reserve's Term Asset Backed Securities Loan Facility (TALF) announced in November. The program will be expanded to target markets for small business lending, student loans, consumer and auto finance, and commercial mortgages.
The Senate today approved an $838 billion economic stimulus bill that includes a $15,000 homebuyer tax credit, just hours after President Barack Obama's new Treasury secretary unveiled a multitrillion-dollar financial stability plan that includes $50 billion for foreclosure prevention programs.
The financial stability plan may also lead to an expansion of existing efforts by the Federal Reserve to drive down mortgage interest rates by buying mortgage-backed securities and debt issued by Fannie Mae, Freddie Mac and Ginnie Mae.
The version of the economic stimulus bill passed by the Senate in a 61-37 vote relies less on government spending and more on tax cuts to kick-start the economy than the version passed by the House Jan. 28 (see story). Only two Republicans voted for the bill in the Senate -- Sen. Arlen Specter of Pennsylvania and Maine's Olympia Snowe -- and all 37 "no" votes were cast by members of the Grand Old Party.
Differences between the two versions of H.R. 1, the American Recovery and Reinvestment Act of 2009, must now be ironed out in a conference committee.
The House version of the bill would restore the upper limits for Fannie Mae, Freddie Mac and FHA loan guarantee programs to $729,750 in high-cost housing markets, where they stood for much of 2008 before being reduced to $625,500 -- a step endorsed by many real estate industry groups.
The House version of H.R. 1 also contains another provision backed by the housing industry -- elimination of the repayment requirement on an existing $7,500 tax credit for first-time homebuyers that is scheduled to sunset on July 1. But the Senate version of H.R. 1 would go farther, increasing the tax credit to $15,000 and allowing all homebuyers purchasing a principal residence within a year of the bill's enactment to claim it on their 2008 or 2009 returns.
The National Association of Home Builders welcomed the Senate's move, saying a $15,000 tax break for all homebuyers could generate nearly 500,000 home sales and create more than 255,000 jobs.
NAHB Chairman Joe Robson said the enhanced tax credit would be "a powerful incentive for homebuyers to get off the sidelines" and urged Congress to make sure the full $15,000 tax credit is included in the final stimulus plan.
In a separate development, Treasury Secretary Timothy Geithner today released details of the Obama administration's new financial stability plan, a successor to the much maligned Troubled Asset Relief Program (TARP).
Geithner said the financial stability plan will include a comprehensive housing program that will provide $50 billion for foreclosure prevention programs. In order to persuade Congress to release the second half of $700 billion in TARP funding, the Obama administration had previously committed to spend $50 billion to $100 billion on a "sweeping effort" to address foreclosures (see story).
Geithner also alluded to a possible expansion of a $600 billion Federal Reserve program to drive down mortgage rates through the purchase of mortgage backed securities and debt issued by Fannie Mae, Freddie Mac and Ginnie Mae (see story).
Further details of the housing program will be announced in coming weeks, Geithner said. According to a fact sheet issued by the Obama administration, the Treasury and Federal Reserve "remain committed to expand as necessary the current effort by the Federal Reserve to help drive down mortgage rates."
The housing program will also establish loan modification guidelines and standards for government and private programs, and require all institutions receiving assistance through the financial stability plan to participate in foreclosure mitigation plans. The Obama administration will also build additional flexibility into the FHA's Hope for Homeowners refinance program to enable more distressed borrowers to participate.
While the main goal of the stimulus bill is to create jobs, the financial stability plan is designed to strengthen banks and restart the flow of credit to homeowners and small businesses, Geithner said. Currently, the financial system is working against recovery, even as the recession puts greater pressure on banks, he said.
"This is a dangerous dynamic, and we need to arrest it," Geithner said. The battle for economic recovery must be fought on two fronts -- by jump-starting job creation and private investment, and by getting credit flowing again to businesses and families.
As it has done under the TARP program, the Treasury will continue to invest in banks that need additional capital, but will now impose conditions to ensure "every dollar of assistance" is used to generate additional lending, Geithner said.
In addition, the Treasury, Federal Reserve and Federal Deposit Insurance Corp. will establish a $500 billion Public-Private Investment Fund to buy up toxic loans and assets. The fund could ultimately provide up to $1 trillion in financing, Geithner said, helping to create a market for real estate-related assets that are "at the center of this crisis."
The Treasury and Federal Reserve will also commit up to $1 trillion in backing for a consumer and business lending initiative, building on the Federal Reserve's Term Asset Backed Securities Loan Facility (TALF) announced in November. The program will be expanded to target markets for small business lending, student loans, consumer and auto finance, and commercial mortgages.
Monday, February 9, 2009
"The Sweet Heart Express"
The Vintage Railroad’s Sweetheart Express is a romantic escape and a perfect way to celebrate Valentine's Day.
The train will depart at 6:00 pm from the historic Cotton Belt Depot, located at 705 S. Main St. in Grapevine. Violinists will set the mood for your trip, as they will be performing on the platform as you board the train. On board the train, enjoy a selection of hors d'oeuvres. Two cash bars will offer beer, wine and soft drinks. Violinists will stroll through the coaches as the train rolls to the Stockyards.
Upon arriving, at River Ranch you will enjoy dinner and romantic music. A cash bar will be available. Following dinner, there will be dancing, with music provided by a DJ. At 9:15 pm passengers will be instructed to board the train for the return trip. The train will depart River Ranch at 9:45 pm. On the return trip the two of you will receive special gifts of a rose and chocolate. The cash bars will resume and also offer complimentary coffee and water. Dress is casual.
$160 per couple
Sweetheart Express Dates & Times:
Friday, February 13, 2009
6:00 pm Load passengers Depart Grapevine Depot
7:30 pm Arrive at River Ranch
7:30 pm Music starts and Buffet line opens
8:15 pm Dancing starts
9:15 pm Announce return boarding
9:15 pm Board Train
9:45 pm Depart River Ranch
11:15 pm Arrive Grapevine Depot
Saturday, February 14, 2009
6:00 pm Load passengers Depart Grapevine Depot
7:30 pm Arrive at River Ranch
7:30 pm Music starts and Buffet line opens
8:15 pm Dancing starts
9:15 pm Announce return boarding
9:15 pm Board Train
9:45 pm Depart River Ranch
11:15 pm Arrive Grapevine Depot
The train will depart at 6:00 pm from the historic Cotton Belt Depot, located at 705 S. Main St. in Grapevine. Violinists will set the mood for your trip, as they will be performing on the platform as you board the train. On board the train, enjoy a selection of hors d'oeuvres. Two cash bars will offer beer, wine and soft drinks. Violinists will stroll through the coaches as the train rolls to the Stockyards.
Upon arriving, at River Ranch you will enjoy dinner and romantic music. A cash bar will be available. Following dinner, there will be dancing, with music provided by a DJ. At 9:15 pm passengers will be instructed to board the train for the return trip. The train will depart River Ranch at 9:45 pm. On the return trip the two of you will receive special gifts of a rose and chocolate. The cash bars will resume and also offer complimentary coffee and water. Dress is casual.
$160 per couple
Sweetheart Express Dates & Times:
Friday, February 13, 2009
6:00 pm Load passengers Depart Grapevine Depot
7:30 pm Arrive at River Ranch
7:30 pm Music starts and Buffet line opens
8:15 pm Dancing starts
9:15 pm Announce return boarding
9:15 pm Board Train
9:45 pm Depart River Ranch
11:15 pm Arrive Grapevine Depot
Saturday, February 14, 2009
6:00 pm Load passengers Depart Grapevine Depot
7:30 pm Arrive at River Ranch
7:30 pm Music starts and Buffet line opens
8:15 pm Dancing starts
9:15 pm Announce return boarding
9:15 pm Board Train
9:45 pm Depart River Ranch
11:15 pm Arrive Grapevine Depot
Monday, February 2, 2009
Real Estate Outlook: What's in Store for 2009?
What will the new year bring for housing and real estate? It's easy to look at all the negative economic news in the headlines and say - there's no sign that 2009 is going to be any better than 2008.
But here's a different perspective to consider from one of the country's veteran financial analysts -- Richard Bove of Ladenburg Thalmann, an investment banking company.
In a research report issued late in December, Bove said he sees a positive dynamic taking shape in the current cycle. The government has intervened aggressively in the markets to push interest rates down -- most notably in the home mortgage sector.
Though it takes awhile for low-cost money to begin having its effect, Bove said he expects "housing prices to stabilize and/or rise (in 2009) after a likely boom in mortgage refinancings as rates fall and loan applications increase."
Add in the expected massive economic stimulus package being put together on Capitol Hill with the incoming Obama administration -- and there's a good chance we're going to see a gradual transformation of the downward cycle into a slow rebound over the coming several quarters.
Already there are positive signs of the turnaround Bove predicts:
Mortgage applications are off the charts, mainly for refis but also to buy houses at affordable prices.
Rates continue to hover at 50-year lows - five percent and even four and three quarters percent for 30-year mortgages, and still lower for 15 and 20 year mortgage terms.
Plus we're all paying a lot less at the gas pump, and sharply discounted prices for retail goods and autos.
And guess what? Americans are actually SAVING again, the national savings rate took a nearly three percent jump last month. That might sound small, but it's hugely important if it is the start of a trend.
There are also some signs that housing prices are stabilizing in some parts of the country. The latest monthly Federal Housing Finance Agency index found home prices UP by six-tenths of a percent in the Mountain states and UP by two tenths of a percent in New England.
You can ridicule small regional gains as statistically irrelevant, but here's an economic proposal to you for the New Year: Keep your eyes open for the small positive signs that are accumulating out there … because all downcycles tail off and come to an end.
The smartest players in real estate -- consumers and the industry - will make the most of the positives -- low-cost money, low prices, stabilizing local markets -- and thrive in the new year.
Written by Kenneth R. Harney
But here's a different perspective to consider from one of the country's veteran financial analysts -- Richard Bove of Ladenburg Thalmann, an investment banking company.
In a research report issued late in December, Bove said he sees a positive dynamic taking shape in the current cycle. The government has intervened aggressively in the markets to push interest rates down -- most notably in the home mortgage sector.
Though it takes awhile for low-cost money to begin having its effect, Bove said he expects "housing prices to stabilize and/or rise (in 2009) after a likely boom in mortgage refinancings as rates fall and loan applications increase."
Add in the expected massive economic stimulus package being put together on Capitol Hill with the incoming Obama administration -- and there's a good chance we're going to see a gradual transformation of the downward cycle into a slow rebound over the coming several quarters.
Already there are positive signs of the turnaround Bove predicts:
Mortgage applications are off the charts, mainly for refis but also to buy houses at affordable prices.
Rates continue to hover at 50-year lows - five percent and even four and three quarters percent for 30-year mortgages, and still lower for 15 and 20 year mortgage terms.
Plus we're all paying a lot less at the gas pump, and sharply discounted prices for retail goods and autos.
And guess what? Americans are actually SAVING again, the national savings rate took a nearly three percent jump last month. That might sound small, but it's hugely important if it is the start of a trend.
There are also some signs that housing prices are stabilizing in some parts of the country. The latest monthly Federal Housing Finance Agency index found home prices UP by six-tenths of a percent in the Mountain states and UP by two tenths of a percent in New England.
You can ridicule small regional gains as statistically irrelevant, but here's an economic proposal to you for the New Year: Keep your eyes open for the small positive signs that are accumulating out there … because all downcycles tail off and come to an end.
The smartest players in real estate -- consumers and the industry - will make the most of the positives -- low-cost money, low prices, stabilizing local markets -- and thrive in the new year.
Written by Kenneth R. Harney
Subscribe to:
Posts (Atom)
