Whats up with the Real Estate Market? - PowerTeamHomes.com

New single family homes are getting smaller, and the trend is likely to last well beyond the recession, according to research from the National Association of Homebuilders (NAHB). The median size of a single-family home dropped from a peak of 2,268 square feet in 2006 to 2,100 square feet in 2009.

Homebuilders attribute the decline to consumers’ desire to keep energy costs down, the lack of equity in existing homes available to roll over into new ones, tighter credit standards, less interest in buying homes as investments, and a growing number of first-time buyers.

Despite the trend toward smaller homes, the average number of bathrooms and bedrooms has showed little change, while three-car garages, fireplaces, patios and decks have declined in popularity.

Recession is still on; the National Bureau of Economic Research finds that the economic recession technically ended in June 2009, but for 81 percent of Americans it isn’t over just yet, according to the American Pulse survey from BIG Research.

Many people are still feeling the pain of the recession; 78.6 percent report they have lost wealth in the past two years, compared with 21.4 percent who say they have not. Reasons for the perceived drop in wealth include a decline in their homes’ value, job loss and declining interest rates on savings accounts.

Looking at First-timers; spurred on by the now-expired homebuyer tax credit, first-time homebuyers accounted for a record 50 percent of all home sales in 2009, up from 47 percent in 2008, according to the “2010 NAR Profile of Home Buyers and Sellers.” The vast majority (93 percent) of first-time buyers took advantage of the tax credit, and 95 percent chose a fixed rate mortgage.

The median age of first-time buyers was 30, and the median income was $59,000. The typical entry-level buyer purchased a property with 1,540 square feet that cost $152,000 and most first timers say they plan to hold the property for 10 years.

First time home-buyer tax credit fraud; the IRS has reported it has suffered nearly $25 million in fraudulent credits from the first time or move up home-buyer credit. Approximately $9 million in credits were issued to prison inmates (they have more than plenty of time to figure that one out!). Other credits were issued to first time home-buyers who bought the property they already lived in from their relatives. No one moved in and no one moved out.

Homeownership Concerns; while 80 percent of Americans still believe buying a home is a good financial decision, concerns about job security remain a barrier to homeownership for many potential buyers, according to NAR and its “2010 Pulse Survey.” Seven out of ten Americans say job layoffs and unemployment remain big problems in their local areas, and eight out of 10 believe these issues are a barrier to homeownership.

More than two-thirds of respondents (68 percent) believe now is a good time to buy a home, down from 75 percent just a year ago, but up from 66 percent in 2008 and 59 percent in 2007. Respondents say the biggest obstacle to homeownership is having enough money for a down payment and closing costs (79 percent), lack of confidence in getting approved for a mortgage loan comes in at 73 percent.

Meanwhile, renters are warming up to the idea of homeownership. More than one-fourth of renters say they are thinking more about buying a home than they did a year ago. Nearly two thirds (63 percent) say homeownership is a priority in the future, and nearly 40 percent say it is one of their highest priorities.

It’s most definitely time for all the renters/potential home buyers to see how big of a home they can qualify them for in today’s market. If they had lost their home, they can become homeowners again for a lot less.

From The IRS: The First Time Home Buyer Tax Credit Form!

As part of the American Recovery and Reinvestment Act of 2009, the IRS has officially released Form 5405 -- better known as the First-Time Homebuyer Credit Form.

True to tax code standards, the 10-field form is accompanied by 3 pages of instructions.

Form 5405 is a helpful, go-to resource for home buyers with questions about the tax credit.

For example, the form distinguishes tax consequences for homes bought in 2008 versus 2009, and clearly defines the term "first-time home buyer".

In addition, Form 5405 highlights the math behind the tax credit. In general, the First-Time Homebuyer Credit is equal to the lesser of:

• $8,000 for homes bought in 2009
• 10 percent of the home's purchase price

Married couples filing separately are entitled to half of the expected credit, and homes sold within 3 years are subject to a credit repayment in the year the home ceases to be the "main home".

Form 5405 is a comprehensive reference. However, be sure to check with your accountant for specific questions about your personal returns and how the First-Time Homebuyer Credit may impact your finances. There is no substitute for professional, paid advice.

The Truth on the New Home Buyer Tax Credit (Part 2)

With Congress reaching agreement on a $789 billion stimulus package for Americans, the clock is ticking for this year's home buyers and homeowners.

The package contains important benefits related to housing.

One provision gives first-time home buyers an $8,000 tax credit provided they purchase a home between January 1, 2009 and December 1, 2009.

IMPORTANTLY, THE FINE PRINT CONTAINS THE FOLLOWING FEATURES THAT COULD MAKE A BIG DIFFERENCE WITH YOUR FIRST TIME BUYERS!!

1. Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 tax return?
Yes. Qualified prospective home buyers who believe they are going to purchase are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the downpayment when they eventually buy within the time period allowed.

Buyers should adjust their withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.

2. If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
Yes. The law allows taxpayers to choose ("elect") to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.

Taxpayers buying a home who wish to claim it on their 2008 tax return, but who have already submitted their 2008 return to the IRS, may file an amended 2008 return claiming the tax credit. You should consult with a tax professional to determine how to arrange this.

3. For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?
Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount.

Be sure to discuss your plans with a qualified accountant before committing to a plan.

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