New Website Tells the Hoosier Housing Story
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Click on the picture to learn why the Hoostier state is doing great! Help for Home Buyers Who Buy Foreclosure PropertiesINDIANAPOLIS (April 8, 2009) - Lt. Governor Becky Skillman and the Indiana Housing and Community Development Authority (IHCDA) announced today up to $25,000 in zero-interest, non-amortizing loans for Hoosiers to purchase foreclosed homes. Hoosiers who buy foreclosed homes to use as their primary residence can qualify for a $15,000 loan from IHCDA's Market Stabilization Fund. The Federal Home Loan Bank of Indianapolis has committed to supply matching loans of up to $10,000. "When Hoosiers open the door to their new home, they open several windows of opportunity," Lt. Governor Skillman said. "This is a unique use of federal dollars that will encourage homeownership while revitalizing communities." The money comes from HUD's Neighborhood Stabilization Program (NSP), which allocated $84 million to IHCDA. The state will use $33 million of that allocation for the Market Stabilization Fund. Assistance from this fund will be made available to income-qualified individuals and families who choose to purchase foreclosed homes in areas of the state in greatest need of assistance. The state has identified areas of greatest need, with the assistance of the How the Market Stabilization Program Works:
These funds will be in the form of a zero-interest, non-amortizing, second mortgage loan. These funds do not have to be repaid as long as home buyers use the home as a principal residence for at least ten years. If the homebuyer sells the home within the first five years, the subsidy is repayable to IHCDA on a shared net proceeds basis. If the homebuyer refinances within the first five years, the entire subsidy is repayable to IHCDA. After year 5 and through year 10, the homebuyer will retain 20% in equity of the award amount per year. This funding will be available to home buyers that are at or below 120% of area median income and who intend to occupy the home themselves. Home buyers will be required to participate in 8 hours of pre-purchase education provided by an IHCDA certified counselor. [ View Post Detail ] Freddie Mac Sees Mortgage Rates Near BottomDon't take our word for it, check out the details as reported by USATODAY.COM First Time Home Buyer Tax Credit
H.R. 1, the “American Recovery and Reinvestment Act of 2009,” passed the House on February 13, 2009, by a vote of 246 – 184. Later that day, the Senate also passed the bill by a vote of 60 – 38. The President signed the bill on February 17, 2009. The bill is a $780 billion package, with roughly 35% of the package devoted to tax cuts (mostly for 2009) and the rest to spending intended to occur in 2009 and 2010.
Homebuyer Tax Credit – The bill provides for a $8,000 tax credit that would be available to first-time home buyers for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009. The credit does not require repayment. Most of the mechanics of the credit will be the same as under the 2008 rules: the credit will be claimed on a tax return to reduce the purchaser's income tax liability. If any credit amount remains unused, then the unused amount will be refunded as a check to the purchaser.
Frequently Asked Questions
In 2008, Congress enacted a $7500 tax credit designed to be an incentive for first-time homebuyers to purchase a home. The credit was designed as a mechanism to decrease the over-supply of homes for sale. For 2009, Congress has increased the credit to $8000 and made several additional improvements. This revised $8000 tax credit applies to purchases on or after January 1, 2009 and before December 1, 2009.
Tax Credit – The Basics
1. What’s this new homebuyer tax incentive for 2009?
The 2008 $7500, repayable credit is increased to $8000 and the repayment feature is eliminated for 2009 purchasers. Any home that is purchased for $80,000 or more qualifies for the full $8000 amount. If the house costs less than $80,000, the credit will be 10% of the cost. Thus, if an individual purchased a home for $75,000, the credit would be $7500. It is available for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009. 2. Who is eligible?
Only first-time homebuyers are eligible. A person is considered a first-time buyer if he/she has not had any ownership interest in a home in the three years previous to the day of the 2009 purchase. 3. How does a tax credit work?
Every dollar of a tax credit reduces income taxes by a dollar. Credits are claimed on an individual’s income tax return. Thus, a qualified purchaser would figure out all the income items and exemptions and make all the calculations required to figure out his/her total tax due. Then, once the total tax owed has been computed, tax credits are applied to reduce the total tax bill. So, if before taking any credits on a tax return a person has total tax liability of $9500, an $8000 credit would wipe out all but $1500 of the tax due. ($9,500 - $8000 = $1500) 4. So what happens if the purchaser is eligible for an $8000 credit but their entire income tax liability for the year is only $6000?
This tax credit is what’s called "refundable" credit. Thus, if the eligible purchaser’s total tax liability was $6000, the IRS would send the purchaser a check for $2000. The refundable amount is the difference between $8000 credit amount and the amount of tax liability. ($8000 - $6000 = $2000) Most taxpayers determine their tax liability by referring to tables that the IRS prepares each year. 5. How does withholding affect my tax credit and my refund?
A few examples are provided at the end of this document. There are several steps in this calculation, but most income tax software programs are equipped to make that determination. 6. Is there an income restriction?
Yes. The income restriction is based on the tax filing status the purchaser claims when filing his/her income tax return. Individuals filing Form 1040 as Single (or Head of Household) are eligible for the credit if their income is no more than $75,000. Married couples who file a Joint return may have income of no more than $150,000. 7. How is my “income” determined?
For most individuals, income is defined and calculated in the same manner as their Adjusted Gross Income (AGI) on their 1040 income tax return. AGI includes items like wages, salaries, interest and dividends, pension and retirement earnings, rental income and a host of other elements. AGI is the final number that appears on the bottom line of the front page of an IRS Form 1040. 8. What if I worked abroad for part of the year?
Some individuals have earned income and/or receive housing allowances while working outside the US. Their income will be adjusted to reflect those items to measure Modified Adjusted Gross Income (MAGI). Their eligibility for the credit will be based on their MAGI. 9. Do individuals with incomes higher than the $75,000 or $150,000 limits lose all the benefit of the credit? Not always. The credit phases-out between $75,000 - $95,000 for singles and $150,000 - $170,000 for married filing joint. The closer a buyer comes to the maximum phase-out amount, the smaller the credit will be. The law provides a formula to gradually withdraw the credit. Thus, the credit will disappear after an individual’s income reaches $95,000 (single return) or $170,000 (joint return). For example, if a married couple had income of $165,000, their credit would be reduced by 75% as shown: Couple’s income $165,000 The Time to Buy - NOW!The following article appeared in Realtor Magazine Online on April 21. 2008: Daily Real Estate News | April 21, 2008 Mortgage Rates Hit Low Point Real Estate Market Holding SteadyThe latest statistics from the Southern Indiana Realtors Association are hot off the presses. Here is the latest comparison of residential homes sold & closed from January 1 - October 31, 2006 vs. the same time period in 2007. 2006 2007 Residential Sold & Closed 3,053 3,074
A number of areas in the United States are suffering from terrible real estate markets. SOUTHERN INDIANA IS NOT! While we would prefer to have exlposive growth in the number of sales and sales prices, we are very thankful to have a real estate market with such stability. For months at Schuler Bauer, we have maintained the opinion, in spite of reports to the contrary, that it's still a great time to buy and sell Southern Indiana real estate. We too could buy in to the misconception that the market is down, however, the numbers do not lie. If it's all the same, we'll just stick by the facts.
Matt Williams Schuler Bauer CFO Makes News
When the local media had questions about the real estate market in our area, who did they call? Our own D.J. Hines, of course! It should come as no surprise. In addition to being a Schuler Bauer owner, our CFO, an Indiana Real Estate Commsissioner, real estate developer and entrepreneur, D.J. has spent the past 27 years observing our local real estate market.
The news story aired on Friday, November 2, 2007. The story below appeared on WAVE3.com:
WAVE 3 Investigates: Home foreclosures rates in the Louisville area By Shayla Reaves
LOUISVILLE (WAVE) -- The mortgage crisis is hitting parts of Kentuckiana extremely hard. Even though you might be on time with your payments, foreclosures in your neighborhood means that your property value goes down. WAVE 3's Shayla Reaves investigates the ripple effects.
It doesn't matter if you've got a good rate and follow the rules. Foreclosure can hit home for anyone. Carol Richardson always dreamed of owning her own home. But after 11 years, she's about to lose the home she shared with her husband Jack. He died unexpectedly and now Carol can't afford the mortgage payment on her own. Carol estimates she's two months away from foreclosure and losing it all. In the latest U.S. market statistics, Kentucky ranks 36th in the country when it comes to foreclosures -- that's one for every 809 homes in the state. It's a number that doesn't compare at all to Indiana. The Hoosier state ranks in the top ten with one out of every 196 homes affected by foreclosure.
Hines went on to say, "How many people -- when the ecomony was really good -- wanted to buy into the American dream? That's what we all want. And in doing that, they didn't look at the long term consequences. They looked at 'what is my monthly payment going to be next month after I brought this house?' and if it was reasonable, they went ahead with the purchase. Now that the economy has changed, their job situation has changed or their interest rates have come up with some of the types of mortgages out there that have adjusted, they find they can no longer afford it." Hines calls the foreclosures a backlash of helping people achieve the American dream.
Just to give you a better idea of what's going on in Indiana, we contacted the Indiana Association of Realtors. For September 2007, foreclosures are up 11.6% from the same time period last year.
What' So Bad?It was Thomas Paine who said “These are the times that try men's souls. The summer soldier and the sunshine patriot will, in this crisis, shrink from the service of their country.” While we are not fighting for our individual liberty, we at Schuler Bauer are fighting hard. But over time, we forget all that is not important, or relevant, to the situation in which we find ourselves immersed.
Just so is today’s REAL ESTATE MARKET. Having the disadvantage of age, I remember too much, and too well, the bad old days of the past. Entering the real estate market place as a new licensee in 1980, I confronted a market where unemployment was historically high. Marble Hill had just shut down. What is Marble Hill you ask? It was a nuclear power plant project east of Charlestown that was stopped, throwing the local economy into a dither. Labor unrest at GE, and Ford, also had Louisville’s metropolitan area employment confidence at a low spot. Couple all this with mortgage rates at 16%, due to out of control inflation, and you have a terrible market. As terrible as that market seemed, it was a great time to enter the real estate market. Agents learned the correct way to market properties. Clients did not think the agent was overpaid; they earned every cent of their commissions. An additional benefit to buyers and sellers was how creative agents developed creative strategies to market every property on the market. Additionally, lenders participated in creative lending situations that help clients through these tough times. In retrospect, “tough” seems like an understatement when describing my first three years in the business (1980-1983). Yet, through these three years, Southern Indiana still saw price appreciation. Southern Indiana still saw the number of transactions increase. Southern Indiana faired better than the rest of the nation, better than Indiana, and better than Louisville. I also remember the market of 1991-1992. During these years, we endured a national recession that flattened price appreciation and lengthened the number of days needed to market a property. During that time, new construction glutted the market, and it took a few years to absorb that glut, but no great catastrophe occurred. In hindsight, today’s market doesn’t even close to times that “try men’s souls.” Unemployment levels are historically very low. Some might argue that we are at or near full employment. UPS and other industries continue to expand employment opportunities, and as an area, we are continuing to get better at attracting new employers. Although mortgages are a little harder to qualify for, the rates are extremely reasonable. Consumer confidence isn’t as high as last year, but it’s not bad, and traffic at open houses is brisk. We do find ourselves at a time where new construction is glutted, but that’s a buyer’s opportunity. All in all, this is a great “move-up market time.” How could that be, you ask? Let’s say the market is off 2% in value from its high of last year. I own a home that was worth $100,000 last year, so this year I am able to sell it for $98,000. I lost $2,000. I qualify to purchase a home for $200,000, if that home is also de-valued 2%,that means I bought a home that was valued at $204,000, I saved $4000. To recap, I lost $2,000 on the sales of my present home, but saved $4,000 on the purchase of my new home. At the end of the day, I saved $2000 and am living in the home of my dreams, not a bad deal. This market is full of these opportunities. You need a Realtor who understands investment, and when real opportunities present themselves. You need an agent who is capable of thinking creatively and positively about your opportunities. I think you have come to the right place and I hope you will return to our website when your real need arises. DJ Hines CFO, Schuler Bauer Real Estate Services Bad Real Estate Market? ENOUGH ALREADY!!Over the past year or so, we have been inundated with news reports that the real estate market is in the tank. Yes, the bubble has burst, the sky is falling, and those who dare to voluntarily make a move are destined to spend eternity in hell for being so reckless. Combined with the recent news about the mortgage industry, you’d have to believe that a giant, flaming meteor is on a collision course with downtown Sellersburg.
The biggest issue facing the real estate market today is fear. A motivational speaker once explained fear to me as False Evidence Appearing Real. Most often, fear is not based in reality, but in our perception of reality. We hear things, accept them as fact, and draw conclusions. Indeed, perception becomes reality. In this article, I want to address a number of these perceptions and share with you what is really happening in our Southern Indiana Real Estate Market.
A common perception is that home sales are down. This morning (August 31, 2007), I researched our Southern Indiana MLS to determine the number of home sales from January 1 – August 30, 2005 verses the same time period in 2006 and 2007; a year-to-date snapshot of where we are compared to this same time the past two years. In 2005, there were 2,301 home sales through August 30. In 2006, the number was 2,438 (5.4% increase). In 2007, the number is 2,439. The truth is home sales are not down. At worst, sales are flat. When you consider 2006 was the third best year ever nationally for home sales, we are doing quite well as a Southern Indiana real estate market.
Another perception is that properties are taking longer to sell. Two factors contribute to this. First, the number of properties entering the market for sale (inventory), and second, the price at which those properties are offered. In 2005, there were 5,516 new listings entered into the MLS. In 2006, there were 6,194 (10.9% increase). In 2007, the number is 6,201. The perceived “slowdown” actually resulted from what happened in between 2005 and 2006. During that time, the percentage increase in new listings versus sales was roughly double (supply in excess of demand). The result, a glut of inventory.
This is where price plays such an important role. For fourteen consecutive years, our market grew in relative equilibrium, resulting in steady (though relatively modest) price appreciation. When the level of available inventory exceeded the demand, the market created a downward pressure on price, something we were in no way used to in Southern Indiana. In 2005, the average days on market (DOM) was approximately 108 days. In 2006, DOM averaged 102 days. In 2007, the number is 105 days. These averages represent the time period from January 1 through August 30. These averages are also only based on properties that actually sold. Our MLS tracks listings by assigning a listing number, not by property address. These DOM averages do not account for expired listings or for sale by owner properties. What these averages do reflect is the average amount of time properties took to sell when they were priced where the market was willing pay. The perception that it takes longer for properties to sell is not accurate. What is actually happening? It is taking longer for sellers to get their properties priced right based on greater competition in the marketplace.
Many people would like to move into a newly constructed home, but are concerned about getting their current house sold. From May 1 – July 31, 2007, existing (resale) homes accounted for 83.4% of total sales. Of total sales, 65.7% sold below $150,000 (84.7% sold below $200,000). If someone were to try to determine what segment(s) of the market are “hot,” it would definitely be resale homes under $200,000 (especially under $150,000). So, if someone currently owed a home that falls into this category, and wanted to buy new construction, what they have to sell is exactly what the market wants to buy at this time.
Twice a year, Steve Hines, Director of Schuler Bauer’s Builders Marketing Service, does an in-depth analysis of the new construction market in Clark, Floyd, Harrison and Scott Counties. (http://www.schulerbauer.com/developments/semi_annual_analysis.pdf). In Clark and Floyd Counties, Steve uncovered an interesting fact. In the first half of 2006, the average new construction home sold contained 1,598 square feet. In the first half of 2007, the number was 1,597 square feet, virtually no change. By contrast, however, the $ per square foot cost of new construction homes sold in the first half of 2006 was $104.63 per square foot. In the first half of 2007, the number was $92.53 per square foot, a decrease of almost 11.6%!
What does this mean? If a person wanted to sell an existing home, the demand is red hot. If the same person wanted to purchase a new construction home, it’s actually more affordable this year than last. Granted, we’ve heard stories about trouble in the mortgage industry. What you might not have heard is that mortgage rates actually tracked down this week! Let’s see, it should be a good time to get my house sold if I price it right; my new house will cost me less now than if I’d moved last year (and probably less than if I wait until next year); and the cost of mortgage interest just went down. Sounds more like an opportunity to me.
The Southern Indiana Real Estate market is not bad. It’s different that what we are accustomed to, but far from what you might perceive. In fact (if you believe in facts), it’s one of the best times in recent history to move into a new construction home.
My greatest fear is that while we are all waiting for Armageddon, we might just be missing the real estate Rapture!
MATT WILLIAMS Real Estate Foreclosure MythsWhy Does The Mainstream Media Want To Scare Us So?
Listen to the evening news and you feel like going into the street and throwing a going away party for most of your neighbors. The impression is that most of us will be homeless in the next few months because the banks will be foreclosing on our mortgages. The economy will be grinding to a halt because so many of us are not capable of managing our money, or we were tricked into bad loans that are about to re-price at higher interest rates.
Upon hearing of the 1919 Chicago Withe Sox "Black Sox" baseball scandal, a young baseball fan was quoted as saying “Say it ain’t so.” Well, it ain’t so!
More than mortgage trickery and poor personal management are to blame for the rising foreclosure rates, but fortunately here in the
First, particularly on the coast, we have seen double digit increases in home values over the past five years. This rate of increase was not sustainable. Prices finally bubbled, and the price bubble burst leaving those who bought in “the last days” with properties that were devalued over night. In some instances, properties lost 25% of their value.
Second, because of the rapid value increases, many investors bought with the intent of selling at a profit over a very short timeframe. Since the property had no shelter value (it wasn’t going to be used as a primary residence), and since these investors were involved in many transactions, their losses are multiplied. Indeed, there is a problem that will be shaken out of the economy and the market over the next two years, but not so much here in
Consider current and historic foreclosures. In the
The media also blows another statistic out of proportion in the hope to scare you into watching tomorrow. They might give an example of a financial institution foreclosing on a $1 million dollar property. Sounds like a huge loss, right? They make it sound like the bank just lost $1 million. But wait! The bank may have loaned $1 million (so they may have a risk of 1 million), but they get the house, right? At some point they are going to sell the house, let’s say for 80% of its value or $800,000. So really, the bank only lost $200,000. A lot of money, but not nearly what the media leads us to believe. And actually, the bank had been putting back a few dollars every month in case one of its mortgages went bad, so they have $75,000 held in reserve to cover any loss they have. They apply the $75,000 toward the $200,000 loss, and their actual loss is $125,000. Still a big number, but not nearly as bad as the $1 million you were led to believe. It takes a lot more losses of $125,000 to ruin the bank.
Things aren’t as bad as they seem. We are being misled, in hopes that fear will encourage you to tune in tomorrow for “Scared Stiff: How to Change Your Life for the Worse Through Exaggeration”.
DJ HINES |
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