Aside from location, number of bedrooms, and schools, the most important criteria for a buyer is usually the price of the house. Many say right up front in the search process, “I want to spend between X and Y dollars.” Usually, the buyer prefers the more expensive home as it has more features than they are looking for!
But in this market, it’s important to understand that rising interest rates can have a huge effect on the monthly expense of mortgage and taxes. Right now, conventional wisdom says that interest rates will go up after March 31st causing higher monthly payments and the tax credit expiration will end April 30th causing buying activity to slow down. This will result in more inventory on the market. Good old-fashioned supply and demand in play here! Both buyers and sellers must be acutely aware of the cost of the house vs. the price of the house in this time period.
Let’s look at the consequences of an interest rate increase. The general rule of thumb is that for every 1 percentage point interest rate increase, the mortgage costs approximately 10% more. That means the buyer must lower the top price he is able to pay, put more money down, or resign himself to a higher monthly payment (sellers must be willing to lower the price of the home quickly to remain a viable and competitive player in the market). Now let’s look at the consequences of increased inventory. Unless a house is priced sharply and correctly, it will not sell in a glutted marketplace. Buyers have an opportunity to make an educated lower offer, maintain the projected monthly payments they can afford, and buy the house they want (hopefully, sellers will react, with the help of their agent, to meet this problem head on and lower the price of the home).
Posted by:
Mary Jane Benedetto
The market has never been better to buy a house and there are several factors contributing to it.
The first is the much publicized Government homebuyer tax credit which has been extended to July 1st, with a house being under contract by April 30th. Recently, Robin Dustow from Wells Fargo Bank (robin.a.dustow@wellsfargo.com), met with us to explain the parameters of this tax credit. It has been enlarged to not only include 1st time home buyers (anyone who has not owned a home for the past 3 years), but also anyone who has lived in their current home for at least the past 5 years. Listed below is the criterion that needs to be met to qualify.
Source: National Association of REALTORS® Government Affairs Division
Congress has extended and expanded the homebuyer tax credit. The modifications in the column labeled “December 1 – April 30, 2010” become effective when President Obama signs the bill. All changes made to the current credit become effective on that date, as well.
The second factor that helps prospective buyers is the loan limits on conforming loans has been extended. The limit is currently $729,750 and was set to expire on Dec 30th. Had it expired, it would have reverted back to $417,000 which means any loan above this amount would be considered a jumbo loan. Jumbo loans are usually harder to obtain and have higher interest rates. The higher loan limits for a conforming loan have been extended until December 31, 2010.
Lastly is the mortgage rate itself, which the government continues to keep artificially low. The chart above shows how historically, when rates have been low, they spike quickly afterwards.
Taking all these factors into consideration, added to house prices being down and still being able to purchase a home with as little as 3.5% down, now is certainly a good time to buy!
Information comes from others and should be verified.
Posted by:
Nadine Gelinas-Coffey
On November 6, 2009, Congress passed an extension of the law that gives an $8,000 tax credit to first time home buyers. It was set to expire on November 30, 2009. But this is more than an extension. The new law changes income limits, allows homeowners to receive a credit of up to $6,500 if they purchase a new principle residence, restricts home price, and changes deadlines among other things.
Below is a brief summary and explanation of this news. This writing does not pretend to discuss all qualifications, specifics, and provisions of the law and should not be used as any type of legal or tax advice. (As with all legal and tax related issues, you should consult your tax preparer or lawyer before doing anything).
Income limits: The new limits, which apply to both first-time and repeat buyers who purchase after Nov. 6, are $125,000 to $145,000 for singles and $225,000 to $245,000 for joint filers as reported by the New Jersey Association of Realtors.
Credits: The $8,000 credit for first-time buyers remains, but the law now gives repeat buyers up to $6,500. It requires that they have lived in their home for at least 5 years in a row in an 8 year period.
Home price: There is an $800,000 ceiling on the sale price of the house in order to be eligible.
Deadlines: The house must be under contract by April 30, 2010 and be closed by June 30, 2010.
If you are planning to purchase a new home in the next 6-8 months, I invite you to call me and discuss your options. You may email me at mjbenedetto@turpinrealtors.com or call me at 908-234-9100, x203. The time to buy equals a large inventory plus low mortgage rates plus the tax credit extension!
Posted by:Mary Jane Benedetto
While the real estate market is slow, there are three bright spots that are working in a buyer’s favor. Lower prices and lower mortgage rates are two well-known factors. But the tax credit that is available for first-time home buyers is not as well-known or understood. This law is far more advantageous to first-time home buyers than the first law that was passed in 2008 since it doesn’t require the credit to be paid back if you keep the home for three years.
Following is a brief summary and explanation of this positive factor. This writing does not pretend to discuss all qualifications, specifics, and provisions of the law and should not be used as any type of legal or tax advice. (As with all legal and tax related issues, you should consult your tax preparer or lawyer before doing anything).
Congress passed an $8,000 maximum tax credit in February in The American Recovery and Reinvestment Act of 2009. The credit is equal to 10% of the purchase price of the home up to $8,000. If you buy a home over $80,000, you can still qualify, but partially. This Act applies to purchases (transfers of title) of a home (primary residence) from 1/1/09 to 11/30/09 for all first-time home buyers as identified in the law.
Qualified buyers must meet income restrictions. Single buyers can earn up to $75,000 annually and joint tax-return couples can earn up to $150,000 annually. Buyers earning over that may qualify for a partial credit. Your tax preparer can give you specific information.
This is the time to buy!
Posted by: 
Mary Jane Benedetto
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