First Time Home Buyer Tax Credit Extended

Realtor.org reports that the First Time Home Buyer Tax Credit has been Extended for contracts signed through April 30th, 2010 that will close by the end of June. The income limits have been expanded as well to include Single buyers making up to $125,000 and Married Couples making up to $225,000. Additionally, those who are looking to trade up may also qualify, provided they have owned and occupied a home for at least 5 years out of the last 8 years.

Detailed information - Realtor.org
$8,000 homebuyers tax credit extended - CNN
First-Time Homebuyer Credit
Frequently Asked Questions - IRS.

Wish every one a Very Happy 4th of July!

Today, the 4th of July 2009, we celebrate the independence day. "We the people" are guaranteed certain rights and liberties by the Constitution of the United States of America, to which we ALL should be grateful.

"We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness."

As citizens of the USA, it is up to us, "We the people," to protect and exercise these rights in our daily lives, and to pass these rights on to the future generations.

We should never underestimate the power of the people, collectively, and in our own selves in making positive changes in our lives and of those around us. We are truly blessed to have the power of the ballet over the bullet and we should exercise it at every opportunity to keep our politicians honest and unswayed by the special interest groups. The government is a representation of the people, by the people, for the people, not the other way around. We should never forget that an elected government official is a servant of the public, and we should hold these people to the highest ideals and expect the best from them.

Use this special day to remind yourself to declare your own independence day from irresponsible spending and to reaffirm to your self to manage your debt responsibly so as not to become a slave due to unmanageable debt.

Bad advise?

An article on Realtor.org is reporting that the pending home sales were boosted by record low mortgage interest rates.

"Record low mortgage interest rates boosted pending home sales for the third consecutive month, with some benefit now from the first-time buyer tax credit, according to the National Association of Realtors®."

This is certainly good news just in time for the home buying season. With the amount of incentives out there for first time buyers, this is certainly a good time to buy. The article goes on to say that a median-income family making $60K could afford a home costing $296K, which I found rather disturbing.

"A median-income family, earning $60,900, could afford a home costing $296,800 in April with a 20 percent downpayment, assuming 25 percent of gross income is devoted to mortgage principal and interest."

While this may be possible if the family has no other debts such as car payments, drives a fully paid clunker and lives a very, very, very frugal life, I would not recommend this advice even to my worst enemy. Some one wanting to buy a $296K home with a $60K income has to be either the biggest gambler or the biggest fool on earth. As is often the case, expenses have a habit of popping out of no where; a car breaks down, a major repair needs to be done on the house, or the HOA asks you to paint your house. In this time of a bad economy, the best advise I can give is to buy a house that you can afford, not as an investment but one to live in, and certainly not to impress others.

CDC Federal Credit Union offers $10,000 Mortgage Grant Program for Down-Payment Assistance

In addition to the $8000 Tax credit offered to first time buyers, CDC Federal Credit Union and Federal Home Loan Bank of Atlanta has teamed together to offer $10,000 in down-payment assistance for qualified buyers. There are strict income limits in order to qualify, and the buyer must contribute $1000 towards down payment in order to receive assistance of $5000 or put a down payment of $2000 to receive the full $10000. If the buyer retains the home for a period of 5 years, the grant is cleared completely and does not require repayment. The program is available on a first come, first server basis, and up to $1 million has been allocated towards this program. For more information, please visit the CDC Federal Credit Union

Housing blues

MarketWatch is reporting that four states, Nevada, Florida, California, and Arizona (in order of the number of foreclosures) are the main culprits in dragging down the housing prices. These four states contributed 193,659 of the 342,038 foreclosure filing nationwide. This equates to these four states contributing about 60% of all foreclosures in the nation. Due to these foreclosure issues, these states are also contributing to dragging down the national median home price by a record 14% to $169,000.

Wish everyone a joyous and peaceful Vesak

Vesak, which is considered to be the holiest of the Buddhist religious days, signifies the birth, enlightenment and the death of Buddha, which occurred on the same full moon day (lunar calendar). Vesak is celebrated in a multitude of ways including going to the temple, food offerings, lighting colorful lanterns, meditating in quiet tranquility, enacting plays from Buddhist stories, colorful parades, etc.

Cinco de Mayo

Cinco de Mayo, is a calibration to commemorate the defeat of French troops in 1862 in Puebla, Mexico. Today, it is a calibration of the Mexican culture with music, food and street parties. For more information on where to celibate Cinco de Mayo, please checkout the following links.

Celebrate Cinco de Mayo Atlanta-style
Atlanta Cinco de Mayo

Buy now or wait?

The real estate market has been in a downward trend for a while and many buyers have been holding out for the market to bottom out. While this is a good strategy, it is worth your while to figure out what its going to cost you to wait for the market to bottom out. Here are my thoughts about it. I want to make the disclaimer that I am not advising you to go out and buy a home. As always, you should do your own due diligence in figuring out what is best for your unique situation.

Lets assume that you are currently renting at $1200 a month, which is reasonable for a descent 2 BR apartment in Atlanta. Lets also assume that you consider buying a $200K house, but want to hold out longer with the hope of buying cheaper. In the buyers market of today, you can buy a very nice home in Atlanta today for $200K, of course depending on the location in the city. The monthly payment for a $200K, 30 year fixed rate mortgage at 5% would be below $1200 a month.

According to the CNN's Real Estate forecast for Atlanta, the decline so far from a peak in second quarter of 2007 is -11.3%. The total decline when we hit the bottom is expect at -14.6% from the peak. This means the house you can buy today for $200K has already declined $25,479 from a high of $225,479. The -2.4% drop expected this year will put the home at a bottom out price of $195,200 which is a drop of $4800. Something hardly worth the wait for a year.

Now lets look at what it will cost you to wait a year to see the bottom. At $1200 a month, it would have cost you $14,400 in rent alone. That is 7.2% of the price of the home. Now lets add to it the $8000 tax credit available to the first time buyers this year to get the sum of $22,400, which is 11.2% of $200K. Which means your effective price of buying the $200K home today is really $177,600. You could say that even if you were to buy the home today or a year from now, you would still have to pay either the mortgage or rent, so it is not a complete waste. However, the difference is that with rent, the money is gone out the window, while you can use the interest paid on your mortgage as a tax deduction and build equity in the home. I recommend talking to a CPA for the tax advantages of owing your home.

The scenario I drew above is assuming that the interest rate for a 30 year mortgage remains at historic lows. When you factor in interest rates which can change quite dramatically, what you save from one end may get sucked out from another. If the rates were to go up as a result of all the financial hiatus we are in today, the interest alone could become a huge disadvantage to make your wait worthless. However, if the rates were to drop down drastically, which I think is quite unlikely, you could come out a winner. Additionally, successfully calling the bottom and the peak is very hard... if it were that easy, many of us would have become millionaires in the stock market! I don't have a crystal ball, but my take is that waiting for the bottom in housing market may not work out for every body.

This side up!

Bloomberg is reporting that the home prices rose 0.7% in February, which was preceded by a 1% increase in January. This is the first time home prices have gone up for 2 straight months in almost 2 years. In addition to this, MarketWatch is reporting that the mortgage applications rose 5.3% last week.

That was yesterday while I was in the midst of writing up this blog about the January and February increases in home sales but I had put it off aside till today as I was busy... just then today, I found this article on CNN about home sales falling 3% in March! I guess that is what was meant by that age old proverb "Don't put off till tomorrow what you can do today!" But then again it saved me from writing an extra blog entry!

According to the article, fortunately this time the experts are predicting there are signs of price stabilization... but then again, with so much volatility any one can be an expert these days. The chance of being right one way or the other looks pretty good!

Headaches with buying bank owned properties

Washington Post is running an article that would be an interesting read for any one considering buying foreclosed properties. While there are many good deals to be found, you must have a lot of patience as banks work like banks generally do... Monday thru Friday from 9 am to 5 pm with many bank holidays that most people don't get... add to it that there are practically no incentives for them to go out of the way to sell bank owned properties as buyers are asking for rock bottom prices. So if you are planning to buy foreclosed properties from banks, be ready for a rough ride. Finding a good Real Estate Agent to help you out will go a long way.