subject: Want To Sell Your Home? Better Pay Attention [print this page] The government granted a reprieve to first time home buyers by extending the up to $8,000 tax credit until April 30, 2010. This will lead to more home sales, and the increased demand will support home prices.
The tax credit was expanded to include families that have owned their home five consecutive years within the preceding eight years to qualify for a $6,500 tax credit when they purchase another home by April 30, 2010.
The program is limited to single persons earning up to $125,000 and married couples who earn up to $225,000. A partial credit is available for those who earn (single) $125,000 to $145,000 and (married) $225,000 to $245,000.
There is no repayment as long as you live in the home at least three years. There are special exemptions and extensions available for the military. The home purchase caps at $800,000. Contact a tax professional to verify you qualify for the tax credit before buying or selling your home.
The first time buyer credit will produce more buyers for the owners of homes that qualify for the $6,500 credit, which will in turn add to the number of buyers in the market.
At least until April 30. What happens then? Will the housing market following fourteen months of incentives for first time buyers experience a cash for clunkers style decrease in demand? In my opinion, yes. The only question is to what degree.
For Springfield, Illinois the timing couldn't be better. This is a seasonal market. Historically the majority of home sales, about 58%, occur during April through September. That means the tax credit will expire at a time we would normally see increasing numbers of buyers entering the market.
That should help blunt the decrease in demand for homes caused by those who purchase a home before they planned, in order to take advantage of the tax credit. The main factors that will impact demand for housing following April 30 will be interest rates, unemployment, and consumer spending.
Interest rates are most subject to major changes. There's only one way for interest rates to go and that is up. The Federal Reserve program to buy $1.3 trillion in bonds at below market rates will end probably in the first half of 2010. Over $1 trillion has already been spent.
The unprecedented level of deficit spending by congress and the Obama administration by quadrupling the annual deficit paid for by borrowing or printing money, has weakened the dollar, and has a high probability to lead to hyper inflation as the economy rebounds.
That would be a bad combination for interest rates, the end of the Federal Reserve buy down program at the same time inflation would begin to kick in. Interest rates under this scenario would increase dramatically, and have a devastating impact upon demand for homes.
Unemployment is at 10.2%, predicted to rise to 11% by mid 2010, and rises to 17.5% according to the Department of Labor Statistics when counting those who have given up looking for a job, and those who are underemployed, working part time needing full time work to get by.
The Stimulus plan has been an objective failure. The only measurable job creation has been in government. The 'jobs saved' claim has proven to be bogus by investigative journalists across the country.
Where will the jobs come from that keeps a healthy number of buyers shopping for homes? Private sector businesses. The assault by government upon the private sector with the takeover of car companies, banks, insurance companies, dictation of CEO pay, and the threats of higher costs and taxes means most businesses won't be hiring anytime soon.
Here are the three main reasons businesses are reluctant to hire. Health care reform adding $700 billion in new taxes, primarily on businesses. The cost of Cap and Trade legislation. Increased income taxes when the Bush tax cuts expire.
This is a triple whammy that will kill job creation, and put millions of jobs at risk. Until Health Care reform and Cap and Trade are resolved, businesses will wait and see before hiring. If both bills pass, the Heritage Foundation estimates up to 2.6 million jobs could be lost.
When people are concerned about their jobs they don't spend freely. Consumer confidence is at its lowest level in months. If consumers aren't spending, then the entire economy from producers, wholesalers, to retailers are negatively impacted. Families concerned about jobs, the deficit, and the costs of Health Care, and Cap and Trade will be conservative with their spending.
When taking into consideration the jobs situation, the lack of consumer spending, the potential for higher interest rates and inflation, the tax credits will drive demand in the housing market until April 30. Unless the jobs situation and consumer confidence improve significantly by April 30, it could be a long spring and summer for home sellers across America.
My advice is to play it safe and to take action before April 30, 2010. Following April 30, the jury will be out on the health of the housing market. Selling your home after April 30 may be significantly more difficult. This may be your best chance to sell your home in the foreseeable future.
