I have gotten several questions about the new tax credit guidelines for repeat buyers.  I have tried to outline the rules.  Give me a call if you have additional questions.

Move-Up/Repeat Home Buyer Tax Credit – Overview

v  Qualifying Conditions:

• The tax credit is equal to 10% of the purchase price up to a maximum of $6,500. Purchases above $800,000 are not eligible.
• Purchase of owner-occupied primary residence between November 7, 2009 and April 30, 2010 -- or one that closes by June 30, 2010, provided a binding sales contract was in force by April 30, 2010.
• Any kind of home including single-family, townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats.
• Home owner must have owned and resided in a home for at least 5 consecutive years of the 8 years prior to the purchase date.
• Married taxpayers: both the home buyer and his/her spouse must pass the homeownership history test.
• The income limit for single taxpayers is $125,000 and $225,000 for married taxpayers filing a joint return.

v  Other Facts:

• New Construction is treated by the tax code as having been “purchased” on the date the owner first occupies the house
• Repeat home buyers do not have to purchase a home that is more expensive than their previous home.
• The law allows taxpayers to choose to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008, or if the purchase occurred in 2010, choose to treat it as if it occurred December 31, 2009. This means that the previous year’s income limits apply.
• A benefit of being able to choose which tax year to apply the credit is that a home buyer in 2009 will know their prior year income and whether they qualify.
• Qualified homebuyers will use IRS Form 5405 to submit for the credit. However the current form 5405 is for tax year 2008. Someone wanting to apply the credit to their 2009 taxes will still use form 5405 but will need to wait until the IRS publishes the one dated 2009 in the upper left corner.
• Taxpayers buying a home who wish to claim it on their prior year tax return, but who have already submitted their tax return to the IRS, may file an amended return claiming the tax credit using IRS Form 1040X.

 Don't forget that the 1st Time Home Buyer credit was extended as well.

The local real estate market is looking up according to the South Carolina Assocaition of Realtors activity reports.  We have seen great activity in the 1st time home buyer market and other markets have shown improvement as well in Upstate South Carolina.

"October was a good month for the housing market in South Carolina. With a 17 percent increase in total sales from October of last year, this is the largest monthly increase in activity we have reported this year. South Carolina REALTORS® agree that the first time home buyer tax credit has had a significant impact on recent sales." ---Jay Rinehart, 2010 president, South Carolina REALTORS®

I’m often asked if this is a good time to buy a home.  Some clients are concerned that home prices may fall further than they have already.  They are assuming that the best course of action is to wait for the bottom in the market and then buy.  The problem with this approach is that you don’t know where the bottom is until you see it in the rear view mirror, meaning until you’ve missed it!

Home prices are one factor in determining your cost of ownership, but so are interest rates and financing availability.  Even though interest rates have gone up in the last six months, they are still near historic lows.  Since your monthly mortgage payment is a combination of paying down your principal and paying the interest owed, if home prices come down a little further but interest rates go up, it could cost you even more to service a mortgage on an identical home!

While a home is a major investment, it is also the center of your personal life.  It’s important to live in a home that reflects your taste and values, yet is within your financial “comfort zone.”  To that end, it may be more important to lock in today’s relatively low interest rates and low home prices, rather than to hope for a further break in prices in the future.

Please give me a call if I can be of any assistance in determining how much home you can afford in today’s market.

I’m often asked if this is a good time to buy a home.  Some clients are concerned that home prices may fall further than they have already.  They are assuming that the best course of action is to wait for the bottom in the market and then buy.  The problem with this approach is that you don’t know where the bottom is until you see it in the rear view mirror, meaning until you’ve missed it!

Home prices are one factor in determining your cost of ownership, but so are interest rates and financing availability.  Even though interest rates have gone up in the last six months, they are still near historic lows.  Since your monthly mortgage payment is a combination of paying down your principal and paying the interest owed, if home prices come down a little further but interest rates go up, it could cost you even more to service a mortgage on an identical home!

While a home is a major investment, it is also the center of your personal life.  It’s important to live in a home that reflects your taste and values, yet is within your financial “comfort zone.”  To that end, it may be more important to lock in today’s relatively low interest rates and low home prices, rather than to hope for a further break in prices in the future.

Please give me a call if I can be of any assistance in determining how much home you can afford in today’s market.