Posts Tagged → Tax Credit
Thursday Trivia
Yesterday the US Federal District Court denied the request for an injunction and restriaining order on the implementation on the Loan Offcier Compensation rule. This is not just a mortgage industry issue as who is to say another industry will not be targeted in the future and our government will take a stab at legislating that industry out of business? Housing led us into the economic crisis and housing will be the catalyst for a true recovery. All of our governments “well intentioned” actions have done nothing but to further bog down the mortgage industry, increase costs, confuse the consumer, and slow down a very slow moving recovery. Thank you Washington DC. To read the courts opinion you can follow this LINK.
Treasuries and mortgages doing better early this morning. At 8:30 weekly jobless claims saw a decline of 6K filings from last week, however last week’s claims were revised from 282K to 394K. Continuing claims were down 51K to 3.714 mil but as with the claims continuing claims were revised from 3.721 mil last week to 4.22 mil in the revision. The 4 wk average also increased to 394,250 frm 391.000 based on the revisions. The claims report today is data collected after the BLS gathered the data for tomorrow’s monthly employment report.
Next up this morning, the March Chicago purchasing managers index, expected at 70.0 frm 71.2 in Feb, was 70.6. The new orders component at 74.5 frm 75.9, the employment index at 65.6 frm 59.8 the highest read since Dec 1983 and the prices pd for materials at 83.4 frm 81.2, the highest since July 2008. Employment and prices are more evidence that the economy is improving along with inflation concerns. However, there was little reaction to the report, treasuries and mortgages held steady with small price gains and the stock market unchanged.
Finally today, Feb factory orders were expected to be up 0.4%, were down 0.1% and Jan revised to +3.3% frm 3.1%.
In Europe inflation data was stronger than expected; in the 17-nation euro region inflation increased to 2.6% in March from 2.4% in February, European Union estimates showed today. That’s the fastest pace since October 2008, and exceeds the ECB’s 2.0% limit for a fourth month. Economists had forecast inflation to hold steady. Next week the ECB will meet to discuss increasing its base lending rate, the inflation data today further increases the chance ECB will increase rates. Following moves in China, Brazil, Russia and India base lending rates are moving higher. In the US so far, the Fed still holds that inflation is not an immediate problem and plans to continue the easing move of buying $600B of treasuries. Whether or not inflation is about to click in, the bond market will face a huge hill to climb keeping long term rates including mortgages at or below the present levels. Fed officials are increasingly more divided on ending QE 2 sooner and less buying than originally intended; Bernanke however appears to be holding with completing the entire $600B buying that will conclude at the end of June.
After all the data this morning the rate markets holding better than we would have thought given the strong Chicago PM index and inflation increase out of Europe. The stock market holding unchanged. Technically the 10 yr held 3.50% on Tuesday giving traders a little opportunity but overall the bond market still holds a bearish outlook for rates. The rest of the session will be setting up for tomorrow’s employment report with estimates still for an increase of 200K jobs and the unemployment rate unchanged at 8.9%. If floating stay close today; normally we do not like having a market position into employment as it is too volatile.
New Homes Sales Were Strong in March, But Not As Strong As The News Would Have You Believe
The sales of newly-built homes soared in March. Even more than what was expected. But the news may not be as glowing as what the media is telling us.
Take a look at the headlines from last Friday:
- Sales of new homes rocketed up 27 percent in March (WaPo)
- New-home sales rise fastest in 47 years (CNNMoney)
- Sales of New Homes Climb by Most Since 1963 (Business Week)
None of these statements is false, per se, but each is somewhat misleading. The biggest reason why March’s New Home Sales was even able to rise 27 percent is because data from the month before it — February — was the worst in New Home Sales history.
In February, new homes sold posted its lowest level in recorded history.
A better comparison would be against March a year earlier; or October 2009, the month before the home buyer tax credit’s initial expiration date.
Against both of those time periods, March 2010 fared well.
Home buyers – first-timers and repeats alike — went under contract last month, taking advantage of the soon-to-expire federal home buyer tax credit program. The credit gives up to $8,000 for first-time buyers and up to $6,500 for repeat ones.
Buyers must be in mutual contract on or before April 30, 2010 to be eligible for the credit, and must closed on or before June 30, 2010.
The New Home Sales data included other strong housing data, too. The current supply of new homes nationwide is at a multi-year low. Along with stronger home demand, this should push home prices higher throughout the coming months.
It’s no wonder builders are bullish on the economy.
The Federal Home Buyer Tax Credit Enters Its Home Stretch — 30 Days Left
There’s just 30 days remaining to use the federal home buyer tax credit.
The credit ranges up to $8,000 for first-time homebuyers, and up to $6,500 for existing homeworkers who have lived in their main home for 5 of the last 8 years.
Claiming the federal tax credit is a two-step process. First, you must be under contract for a new home on or before April 30, 2010. Then, you must close on said home on or before June 30, 2010.
There are no exceptions on the dates (except for certain members of the military).
Timeline aside, homebuyers and the subject property must also meet minimum requirements in order to be tax credit-eligible:
- You can’t purchase the home from a parent, spouse, or child
- You can’t purchase the home from an entity in which the seller is a majority owner
- You can’t acquire the home by gift or inheritance
- Each buyer in the purchase must meet eligibility requirements
- The home sale price may not exceed $800,000
- Buyers may not earn more than $125,000 as single-filers; $225,000 as joint-filers
The complete eligibility checklist is published on the IRS website. Or, if you find IRS-speak too difficult, make a phone call to your accountant. Asking a tax professional’s advice on a tax-related matter is never a time-waster.
And lastly, don’t forget that if you’re claiming to federal tax credit for home buyers, it’s a tax credit and not a deduction. This means that a tax filer who qualifies for the full $8,000 and for whom the “normal” federal tax liability is $8,000, will owe no federal taxes in 2010 to the IRS.
If you’re an active buyer , mark your calendar for April 30, 2010. It’s 30 days from now and, as the date gets closer, buyer traffic will increase. The likely result is higher home prices and more difficult negotiations. The best time to act may be today.
Existing Home Sales Flatten And Point To A Much Better Spring
As expected, Existing Home Sales fell in February, slipping 30,000 units versus January’s numbers. It’s the 4th straight month in which Existing Home Sales were lower, month-over-month.
An “existing” home is one that is previously owned and lived-in (i.e. not new construction).
Existing Home Sales peaked in November 2009, just as the First-Time Home Buyer Tax Credit was set to expire. Immediately thereafter, according to the National Association of Realtors®, monthly sales plunged 17 percent in December, then another 7 percent in January.
Comparatively, February’s dip is a modest 0.6 percent and is more in line with the pre-tax-credit Existing Home Sales trend. The real estate market is rediscovering its normal.
But “normal” may not last for long.
When the federal home buyer’s tax program was extended last year, the new rules stated that home buyers must be under contract for their new, respective homes on, or before, April 30, 2010 in order to claim up to $8,000 in federal money. That deadline is approaching and many markets are experiencing a surge in buyer traffic as April 30 nears.
The Existing Home Sales data doesn’t reflect this new demand, nor the number of new contracts written. It only accounts for home closings and, in February, closings were down.
For today’s buyers, the market looks favorable. The federal tax credit is in place, mortgage rates stubbornly stick near all-time lows, and home prices are staying in check.
Existing Home Sales should gain through March and April, pressuring home prices higher. And, by the time the press reports the gains, the best deals in the city may already be gone. Consider acting sooner rather than later.
7 Weeks Remain To Find A Home, Claim Up To $8,000 In Tax Credits
In November, Congress extended and expanded the First-Time Home Buyer Tax Credit program to include a subset of “move-up” buyers — homeowners that have owned and lived in their home for 5 of the last 8 years.
The credit ranges up to $8,000 per buyer. There’s now just 7 weeks left to take advantage.
To be eligible, home buyers must be under contract for a new home no later than April 30, 2010, and must be closed no later than June 30, 2010.
In addition to meeting the deadline dates, there’s a basic set of requirements to be tax credit-eligible:
- You can’t purchase the home from a parent, spouse, or child
- You can’t purchase the home from an entity in which the seller is a majority owner
- You can’t acquire the home by gift or inheritance
- Each buyer in the purchase must meet eligibility requirements
There’s other criteria, too.
For one, the sales price on the subject property cannot exceed $800,000. Homes sold for more than $800,000 are ineligible for the tax credit. Furthermore, households earning more than $125,000 as single-filers, or $225,500 for joint-filers, are ineligible.
You can read the complete eligibility requirements at the IRS website, or, you may just find it simpler to speak with your accountant about it. There are some nuances in qualifying for and claiming the tax credit on your returns and getting a professional’s opinion is always wise.
And lastly, don’t forget that government’s tax credit program is a true tax credit. It’s not a tax deduction. This means that a tax filer whose “normal” tax liability is $3,500 and who is eligible for $8,000 in credit will receive a $4,500 refund from the U.S. Treasury.
If you’re currently in the House Hunt, mark your calendar for April 30, 2010. It’s 7 weeks away and you can be sure that as the date gets closer, buyer traffic is going to increase. You may find sellers more willing to negotiate today than several weeks from now.