This past week we have seen headlines scream at us that the sky is falling and the world is coming to an end. The National Association of Realtors announced that sales of existing homes plummeted nationally 27.2% in July. Buried deep in that press release the San Diego Association of Realtors reported existing home sales were down 13% in San Diego County.

Yes, 13% is a large drop, but in a County where the Federal Tax Credit for buying a home ended in May and the State Tax Credit for buying your first home ended in June, a drop of 13% was not unexpected. The fact is many home buyers accelerated their purchases this year to take advantage of those tax credit offerings!

Another national press release announced that the average price for the sale of an existing home was up 0.7% over the last 12 months. Claiming that the momentum from earlier this year was dead and that home prices had topped out.

Again, buried in that press release, RealtyTrac said San Diego County experienced a 4.6% increase in home prices during the past year. While fewer people may be buying homes (see discussion above regarding the tax credit incentive), they are paying more for their homes. And, those homes are increasing in value better than the rate of inflation or the rate on your savings account from any bank today!

And, finally, another national press release did highlight some positive news. This press release found that the home loan failure rate (including default notices, scheduled auctions and bank repossessions) had decreased by 10%. While the press release did not editorialize the benefits of this drop in the home loan failure rate, it did acknowledge that the reduction was a good sign.

Again, buried in the back of this press release, the numbers for San Diego County were a bit more improved. Home loan failure rates in San Diego County were found to be down 37% from July of 2009! That is an amazing factor and shows a very strong move by the home loan holders in San Diego County back towards stability and confidence in their home ownership financially.

So, let’s review the only rule that truly applies to real estate investment anywhere in the world … LOCATION, LOCATION, LOCATION! Can you guess where the smart buyers are putting their money in real estate today? Do you think it is on a national basis or right here, in San Diego County?

Well, you are right, But, I also would guess that you would not have come to that conclusion if you only read the headlines. Dig deeper, be a smart consumer!

It is important to note, the original date for entering into a binding purchase agreement has not changed. This extension only applies to those agreements entered on or before April 30, 2010. This extension allows those specific agreements until September 30, 2010 to close escrow and hence, provide the new home owner with the opportunity to claim the “up to $8,000 or $6,500 Federal Tax Credit”.

April 30, 2010 is the last day you may execute a binding purchase agreement to qualify for the Federal Tax Credit. That purchase agreement must result in an escrow closing by June 30, 2010 to complete the requirements of eligibility for the Federal Tax Credit.

For those home buyers in California, the Tax Credit becomes available on May 1, 2010. So, if you sign your binding purchase agreement by April 30, 2010 and then close escrow by June 30, 2010, you may be eligible for BOTH the Federal and the California Tax Credits! That could be as much as $18,000 for a first time home buyer and $16,500 for a purchaser of a new home (where the buyer has owned a home for at least 3 of the previous 5 years)!

All other eligibility requirements are still in effect, so please refer to my earlier posts for the California and Federal Tax Credits to determine if your specific circumstances allow you to participate in these programs. Or, stop by a Brookfield Homes Sales Office and let one of our professional sales counselors help you understand the details.

Purchasing a new home is a big step. While affordability is at record highs in most parts of the country, the incentives offered by California and the Federal governments will not last forever. You have 15 days to act to participate in the Federal Tax Credit. It is now time to take advantage of this program!

You will recall that the Federal Tax Credit offers first time home buyers up to $8,000 and repeat buyers up to $6,500 for the purchase of a new home. Legislators have continued to repeat “there will be no further extensions of this stimulus program.”

In earlier posts, I outlined the specifics of the tax credit, but there are a couple of points you should remember. First, this is a true credit against your next year’s tax bill. A tax credit applies dollar for dollar to your tax liability. If you owe the IRS $10,000 in tax liability and you are eligible for $8,000 of tax credit, your tax liability would be reduced to $2,000!

Second, this tax credit is fully refundable. This means if you owed the IRS $5,000 on your next tax return, and you are eligible for $8,000 in tax credit, then the government would send you the difference, $3,000, as a tax refund!

And third, this tax credit is applicable to the purchase of a newly constructed home or a resale home. The government is trying to stimulate economic activity with this tax credit. And, given today’s low mortgage interest rates and low home prices, your buying power may never have been stronger. This means you can get more home for your money today.

Taken all together, now is a great time to buy a new home! But, that time is quickly slipping away. You must act now if you want to take advantage of low prices, low mortgage rates and the federal tax credit for buying a new home!

In his last State of the State address, the Governor announced his upcoming budget proposal (to be released on Friday) would include $200 million for Tax Credits to home buyers in California. Based upon the success of last year’s New Home Purchase Tax Credit, the Governor will propose to the Legislature that the purchasers of each new and resale home in California be granted up to $10,000 of State Tax Credit (within specific guidelines and time frames).

The idea for a California Home Purchase Tax Credit is driven by a number of factors. First, the incentive for providing the Tax Credit is the creation of new jobs. As highlighted by the California Building Industry Association (CBIA) a Tax Credit for the construction of each new home in the state generates up to 3 new jobs. Second, the Tax Credit has been shown to also generate up to $10,000 of new State revenues (through sales, income and property taxes) and up to $3,000 of local revenue (through sales and property taxes). And third, the Tax Credit also helps stabilize neighbor home prices through increased demand and sales activity.

A new twist on the proposal this year is the provision to utilize the Tax Credit for resale home purchases. This change follows the recent Federal Housing Tax Credit extension plan, which opened up the Federal Tax Credit to any purchaser of a home, not just to first time home buyers.

A number of issues will need to be worked out with the Governor’s proposal. For example, it is likely that the new State Tax Credit will follow the guidelines utilized by the 2009 Housing Tax Credit, requiring the credit amount to be spread over three years and limiting the credit amount to the amount of state tax owed by the home buyer, not to exceed $3,333 per year. Additionally, by placing a limit on the Tax Credit allocation of $200 million and opening the Tax Credit eligibility to resale and new home buyers, the Franchise Tax Board (FTB) will need to create a program allowing prospective home buyers to reserve an allocation of the limited Tax Credits at the time a purchase contract is signed for the home sale. There may also need to be a division of the Tax Credit allocation between new and resale home buyers, as the resale homes will be more available and will dominate the sales activity in the early weeks of the Tax Credit life. While this may sound like a “so what?” to most people, the job creation aspect of the stimulus provided by a Tax Credit will not achieved if only a small number of new homes buyers are able to take part in the program.

And, finally, remember this is a proposal. The Governor can not make the law, he can only approve a law drafted by the Legislature. The Governor’s budget proposal contains the provision for a Housing Tax Credit. The Administration will need to work with the State Senate and Assembly to craft the language, the rules and the “where as-es” to draft a Bill that creates a Tax Credit for California home buyers. As they say … “the devil is in the details”. Stay tuned as the adventure begins again!

For First Time Home Buyers

Maximum price for the purchased home is $800,000.

New home must be the principle residence of the buyer(s) for the next three consecutive years.

Income limitations $125,000 for full credit by a single buyer, (up to $145,000 for partial credit), $225,000 for a married couples for full credit, (up to $245,000 for partial credit).

First Time Buyer must be at least 18 years of age, may not be a dependent on someone else’s tax return and may not have owned a home in the past three (3) years.

The purchase may not be of a home from a direct lineal ancestor or descendant.

The Tax Credit is based upon 10% of the purchase value, up to a maximum of $8,000.

The Tax Credit is fully refundable, meaning if you owe less than $8,000 in tax liability, the IRS will send you the difference.

The new limitations (for income, qualification of the buyer and source of the purchased home) all became effective on November 6, 2009 and will remain in effect until a purchase contract is signed, no later April 30, 2010, and the home closure, no later than June 30, 2010.

There are special rules for members of the armed forces who have been stationed outside the United States for at least 90 days. Please consult you professional tax adviser for how these rules may impact your decision to purchase if you are a member of the armed forces.

For homes purchased prior to November 6, 2009, the rules of the original First Time Home Buyer Tax Credit still apply.

For the Move-up Home Buyer

All of the above qualifications and restrictions apply, except the Tax Credit is limited to $6,500, the Buyer must have established a permanent residence in another owned home for at least 5 of the previous 8 years and the final point regarding the “original” legislation does not apply . There was no Move-up Home Buyer Tax Credit in the original legislation, so to be eligible to apply for this Tax Credit is limited to homes purchased after November 6, 2009, the effective date of this legislation, signed a contract before April 30, 2010 and closed escrow by June 30, 2010.

As with all tax related decisions, I recommend you discuss them with your professional tax adviser, because your individual circumstances may create other opportunities or alternatives.

For additional information please refer to the following websites:

National Association of Realtors

National Association of Home Builders

Internal Revenue Service

Wall Street Journal

The Move-up Home Buyer Tax Credit is available today for buyers that are in escrow and meet the income and ownership guidelines!

I you are a First Time Home Buyer, who is currently in escrow, and meets the other income and ownership guidelines, but your escrow was scheduled to close after December 1st, you are now eligible for the Tax Credit, without any further changes to your purchase or escrow documents.

As more information becomes available, I will pass it along!

First time home buyers will be eligible for the Federal Tax Credit if they meet the criteria of the original Tax Credit legislation, namely:

1. An income limitation of $75,000 for a single purchaser or $150,000 for a couple.

2. The Tax Credit is limited to 10% of the purchase price of the home or $8,000, whichever is less.

3. The purchaser must be a first time home owner and the residence must be their principle residence.

For the new Move-up home buyer the criteria is similar:

1. You must have owned your current home for 5 or more years.

2. The income limitations are $125,000 for a single or $250,000 for a couple, but above those limits the $6,500 Tax Credit may be available on a phase out basis.

3. The home must be your principle residence and may be priced up to $800,000.

For both groups, the Tax Credit will be available to those purchasers who sign a contract to purchase by April 30, 2010 and close escrow no later than June 30, 2010. (The credit may be extended for up to 12 months for purchasers who are serving in the military outside the United States for at least 90 days. Further clarification on this provision will be forth coming.)

Senator Johnny Isakson (R-Ga) believes this will be the last Tax Credit extension for home buyers. If you are interested in your first new home or would like to move-up to a new home, now is the time to be buying. The Federal Tax Credit is being given a one time extension … think of it as a great Christmas present!

Generally speaking, FHA qualified lenders will be allowed to loan against, or purchase the credit from the buyers, under specific guidelines and regulations. This will provide the buyer with additional funds to supplement their minimum 3.5% down payment or to cover closing costs.

This is one more way to help home buyers utilize all the tools available to them. However, the Federal Tax Credit program is set to expire on December 1, 2009. Home buyers must close escrow by that time to qualify for the Tax Credit. If you qualify for the Federal Tax Credit for first time home buyers, now is the time to be looking for your new home!

Well, first and foremost the $10,000 California Tax Credit for new home purchases have brought buyers to the communities of Veranda and Ironwood at MorningStar Ranch. Coupled with an opportunity for many buyers to qualify for the $8,000 Federal Tax Credit, some new homeowners are looking at up to $18,000 in future tax credits for buying a home today!

Additionally, many new home buyers have tried to participate in the “foreclosure market” and been treated poorly. We are hearing from a number of our new home buyers that they made multiple offers on foreclosed homes and never heard back from the bank or the broker. They have also told us about the deplorable condition of many of the foreclosed homes they looked at and when they added up the costs to bring the home back to “livable condition”, they were discouraged by the whole process. Then they heard about the California New Home Tax Credit and found out it doesn’t apply to foreclosed home purchases! Their disappointment was complete.

MorningStar Ranch Homeowners

Now, they are in the new home market and they have found a refreshingly different approach to buying a home. They can select their floorplan, their lot, their flooring, countertops and cabinets! They receive assistance with their purchase process, their loan process and their escrow. They receive a warranty for the new home they purchase and they get up to $10,000 in California Tax Credit! If they qualify for the Federal Tax Credit, they can receive an additional $8,000!

With 8 sales in the last 3 plus weeks, buyers are making their dreams a reality with a new MorningStar Ranch home. The recent sales activity has also prompted Brookfield Homes to start construction on nine more homes! This means a better selection on the floorplans and options that buyers are looking for. Priced from the low $300k’s, with generous builder incentives, and coupled with historic low mortgage rates, these new homes are a tremendous value for today’s cost conscious home buyer.

Stop in and take a look at our award winning homes and let the professional sales counselors show you how easy and affordable a new home in Riverside County can be. Then one day soon, you could be watching the sun rise at your very own home in MorningStar Ranch.