By now everyone has heard of the first time homebuyer tax credit. It has helped stimulate the housing market this year in large part by brining first time homebuyers out of the woodwork. The incentive has helped the staggered housing market start recovering but if buyers have not closed on their new homes by November 30, the clock runs out and the opportunity goes away.
Many so called experts think that the first time homebuyer (defined as someone who has not owned a property for the last three years) credit will be extended, but I disagree. There is one simple reason that it likely won’t be extended beyond its current expiration. It is really expensive. Keep in mind that the tax credit is not like a deduction where if you are in a 25% tax bracket you save $2000 with an $8000 deduction. Here the $8000 credit saves you $8000. Add that up over a few million buyers and all of a sudden you are talking real money.
With the amount of deficit spending the government has committed to, it is unlikely that the credit can be extended, much less increased as some in Real Estate and Lending have pushed for. Therefore expect a big thud around Christmastime when the buyers go to the sidelines.
So here is the advice. It’s not likely to be financially better to buy later. No additional credit is coming anytime soon. Oh yeah, and if you are selling. Take the next offer you get and run to the hills with it. After the credit expires, buyers will go to the sidelines and those that stay will negotiate even harder for you to take a price cut. The gap between the raw number buyers and sellers will increase dramatically and buyers will apply the pressure.
One final note, regardless of whether you are buying or selling. Make sure that the mortgage comes from a company lending their own money. It will ensure that they have more control over the underwriting process and approval timeframes. We are late in the game on this credit and the mortgage brokers built in ten day disadvantage could be the death of your deal. Act fast and Win Today!
