Yesterday we discussed the role bank owned homes played in the Phoenix market through 2009. While this was the dominant story line, it certainly wasn’t the only factor impacting our market.
Though the scope of its effect can be debated endlessly, the $7,500 first-time home buyers tax credit – and the extension and expansion of that credit in November – was the impetus many buyers needed to get off the fence and make their first purchase.
Combine low interest rates with depressed prices and an extra check coming from Uncle Same for those who qualified, and it was the perfect storm particularly for homes priced at $125,000 and under.
Simply look at the sales per year for 2009 versus the sales per year in 2008 and you get a sense of the severe increase in activity over the past 12 months.
Arguments against the tax credit, including those written right here, weren’t so much about the credit itself but the policy of extending the public dole and the concern that a program once established often comes to be expected and is hard to end.
With just a six-month extension to April 30 (with a close of escrow date of June 30), and even though it’s almost certain there will be a movement to push the tax credit deadline further into the future, there remains a somewhat short time frame for buyers wanting to take advantage of this credit to get into the market.
Most intriguing is the $6,500 tax credit for move-up buyers, especially when you consider that it doesn’t appear a homeowner needs to sell his or her current residence to take advantage of the credit so long as the new residence becomes his or her primary home.
From Michelle Lind, general counsel from the Arizona Association of REALTORS:
Q: I’m already a homeowner. If I buy a replacement home after Nov. 6, 2009, to use as my principal residence, do I have to sell my home to qualify for the homebuyer tax credit?
A: If you meet all of the requirements for the credit, the law does not require you to sell or otherwise dispose of your current principal residence to qualify for a credit of up to $6,500 when you buy a replacement home to use as your principal residence. The requirements are that you must buy, or enter into a binding contract to buy, the replacement principal residence after Nov. 6, 2009, and on or before April 30, 2010, and close on the home by June 30, 2010. Additionally, you must have lived in the same principal residence for any five-consecutive-year period during the eight-year period that ended on the date the replacement home is purchased. For example, if you bought a home on Nov. 30, 2009, the eight-year period would run from Dec. 1, 2001, through Nov. 30, 2009. (11/17/09).
The extension is but one part of the government effort to stabilize the real estate market, at least as much as it can be. Other efforts will be touched upon in a later post.
Do your observations differ from mine? Jump into the comments and join the conversation!