Although there is discussion about extending it, the federal tax credit of up to $8,000 for first-time homebuyers is slated to expire November 30th. Through August of this year, about 1.4 million people nationwide have taken advantage of the tax credit, accounting for about 40 percent of all purchases. The tax credit, part of the American Recovery and Reinvestment Act of 2009, is available only to first-time buyers who have not owned a principal residence during the three-year period prior to the purchase. The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000. Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.
Sales of existing homes rebounded sharply in September to their highest level in two years, getting a strong boost from people responding to the first-time buyer tax credit, which is freeing many sellers to buy another home. Pending home sales have increased for seven straight months, the longest in the 8 year history of the index. Still, home values nationwide continue to decline, falling 8.5% from a year earlier. While extending the tax credit would help lift housing prices, it would only be temporary. However, if economic indicators such as consumer confidence show improving trends, experienced homebuyers will stay in the market and take advantage of the low prices, even without the credit.
Regionally, the strongest market was the West, where sales climbed 13% in September. However, the median price of homes sold during the month was down 15% from last year. In the Denver metro area, however, home resales actually declined in September compared with a year ago, but median sales prices of houses and condos increased. Although the majority of the activity has been in the lower price ranges, an increasing number of move-up buyers in the market has pushed prices higher. The number of homes on the market declined 17.1 percent from a year ago, a number that’s likely to continue falling through the end of the year because of the holidays and the high number of first-time buyers in the market. Many people seeking lower-priced homes are even being out-bid. Although mortgage rates in Colorado have recently climbed slightly, rates for 30 year fixed home mortgages recently averaged 4.94 percent.
One of the last states to succumb to the U.S. recession, Colorado appears poised to be among the first states to escape its grasp. If technology and business spending fuel the recovery, then Colorado is in a strong position to benefit. Forecasts call for the state’s job growth to return to a positive 0.4 percent next year, fourth-best among all states. Retail sales in the state are expected to rise 4.4 percent next year.
As we all know, real estate has always gone through cycles. At present, it is still a strong buyer’s market, but it appears as if we may be poised to reverse the trend, given an improving economy, a smaller inventory of homes on the market, an expanding buyer pool and low mortgage rates. There may never be a better time to buy than the present. Give the Arnie Stein team a call, and we can help you find the perfect home for your needs and desires!