With almost a third of US mortgages upside-down, many move-up buyers are unable to sell their present homes and therefore cannot take advantage of the expanded tax credit. Despite a looming deadline, the real estate market is showing little sense of urgency, as sales continue to slump and loan applications are at their lowest level in a dozen years. See the following article from Property Wire for more on this.
The latest US home buyers tax credit aimed at stimulating the country’s residential property market is doing little to increase sales, according to real estate agents.
Last year the first tax credit for new buyers helped boost home sales but since the federal government made it available to existing property owners the same surge has not happened.
Real estate agents around the country say the credit is doing little to elevate sales. They point out that unemployment is still high at around 10% and consumer confidence is falling.
Property prices have stabilized in some markets but are still a third below their 2006 peak. Droves of people who want to sell are stuck because their home is worth less than they paid for it. Also harsh winter weather has Americans shoveling driveways instead of preparing their home for buyer visits.
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No one is saying that they need to buy before the tax credit expires,’ said Tim Surratt, an agent with Greenwood King Properties in Houston. Indeed, sales of both new and previously occupied properties dropped in January and the Mortgage Bankers Association’s index of loan applications recently hit a 12 year low.
Also, the percentage of current homeowners looking to buy was nearly flat from January to February, according to a poll of 1,500 real estate agents by Campbell Communications and Inside Mortgage Finance.
The Obama administration has pumped billions into the housing market, hoping it will lead the nation out of its economic doldrums. Efforts to modify loans facing foreclosure have largely failed. So there are concerns that hundreds of thousands of discounted homes will hit the market this year, hitting a market desperate to balance high supply with sluggish demand.
‘You’ve got a really big problem that requires big guns, and the tax credit is just not big enough,’ said Roberton Williams, senior fellow at the Tax Policy Center in Washington.
Agents believe the tax credit’s true test will come in the spring, normally the busiest home buying season. But homeowners, in many cases, will need to sell their current property to afford a new one and claim the credit on tax returns. That’s a major issue for borrowers who owe more than their home is worth. Nearly one in three homeowners with a mortgage is currently in that situation, according to Moody’s.
Also, $6,500 may not mean much to a buyer with enough equity to sell a property and afford another home. The savings will hardly dent down payments or moving costs. Most sellers employ real estate agents who typically receive 6% of the sales price. For a home sold at the national average price of $164,700, the agent’s commission is $9,882, more than the tax credit.
Real estate agents hope, however, that the tax credit will lure more buyers as its approaches its April deadline. To qualify for the $6,500 credit, buyers must have owned and lived in the same home for five consecutive years out of the past eight. They must sign a contract by April 30 and close the sale before June 30. The home’s purchase price can’t exceed $800,000, and it must be used as a main residence. There is also an income limit for single taxpayers of $125,000 and $225.00 for a couple.
This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.