More than just real estate.
Fantastic news! The House of Representatives just voted 403-12 to pass the Homebuyer Tax Credit! This is the same bill that passed in the Senate yesterday. The next step is the President’s signature, but he has already committed to signing it (probably tomorrow). This news should help us build on the momentum that we are now experiencing in our housing market.
After the Senate gave final approval last night without a dissenting vote, the House of Representatives voted overwhelmingly this afternoon to pass legislation containing an extension and expansion of the homebuyer tax credit, completing Congressional action and sending the tax credit to President Obama for his signature, possibly as early as tomorrow.
The $8,000 homebuyer tax credit for first-time buyers, due to expire in 25 days, will be extended through April 30 of next year and buyers will have an additional two months, until the end of June, to close. First-time buyers who are in the process of making a purchase will no longer need to worry about qualifying for the $8,000 credit if they close after the November 30 deadline. The new legislation increases the income limit for couples with income up to $225,000, a nearly $55,000 increase above the level in existing law.
For the first time, the new legislation makes buyers who already own a home eligible for a credit. A $6,500 maximum credit will be available to existing homeowners who have lived in their current residence for five of the prior eight years. The legislation limits eligibility for the existing homeowner credit to homes worth $800,000 or less.
The legislation takes effect December 1 and is not retroactive. Both credits are available only for primary residences, not second homes or investment properties.
In the House debate, Speaker Nancy Pelosi (D-Calif.) took the floor to say the homebuyer tax credit was helping a new generation of Americans live out their dream of homeownership and financial independence. Debate on the homebuyer credit was overwhelmingly positive and the legislation passed 403 to 12.
However, several leading economists have voiced concern about the $16.7 billion cost of the credit and the wisdom of spending up to $400,000 per homebuyer to stimulate real estate sales and White House support for extending the credit has been lukewarm at best. However, it is virtually certain that the President will sign the legislative package, which contains an expansion of unemployment benefits as well as the tax changes.
In the Senate, the homebuyer tax credit was amended to a bill expanding unemployment benefits by 20 weeks for those who have exhausted their benefit. The latest unemployment numbers are due out tomorrow and Congressional leaders are rushing the unemployment bill to the White House so that the President can show compassion by signing on the same day more job losses are announced.
The legislation included provisions added to address complaints of fraud. The Internal Revenue Service is given greater authority to oversee the process to root out fraud, and provisions are added in response to past abuses of false sales or underage buyers. An investigation by the Treasury Department’s Inspector General for Tax Administration found that more than 580 children, some as young as four years old, had received $627,000 in first-time homebuyer credits. The IRS has identified 167 suspected criminal schemes and opened nearly 107,000 examinations of potential civil violations of the first-time homebuyer tax credit.
The legislation also contains a provision supported by the National Association of Home Builders which will help larger companies strapped for cash with net operating losses (NOL). Ordinarily these companies can carry back these losses for only two years to qualify for a tax refund. The provision would make this process extend the carry-back to five years for either 2008 or 2009. The tax break will now apply to losses in either 2008 or 2009, and the income cap will come off.
From RISmedia
Thursday, November 5, 2009
Wednesday, November 4, 2009
More news for local investors
More than just real estate.
Last week we saw that some 35 percent of home sales during the past year were bank-owned foreclosures or government-owned resales. That is a huge increase from just a few years ago when sales of these homes were not a significant part of the Atlanta market.Two factors cause these homes to sell at dramatic discounts:* Lenders and government agencies are charged with disposal of these properties regardless of price. These sellers simply do not have the luxury of waiting until the market improves; and* These same sellers have a strict policy of selling the properties in "as-is" condition, meaning no repairs and no disclosure statements. The buyer takes all the risk. As a result, the only potential buyers are investors looking for a bargain.So, what are the specific characteristics investors look for in today's market? There are many, but the main three are:
1. A LOW PRICE This is the most important part of the equation. The acquisition price needs to be low enough to cover all needed repairs, carrying costs, marketing expenses and still represent a bargain to the end consumer. Whether the investor intends to resell to an owner-occupant, or hopes to rent for long-term appreciation, the price paid for the acquisition is critical to all later profitability.In the case of Atlanta's post-foreclosure marketplace, investors have found a "market bottom." In other words, almost anything will sell very quickly if it is offered in the $30,000 to $40,000 range. Furthermore, the market is getting hotter.
2. SCOPE OF REPAIRS While the uninitiated might think that the level of repairs necessary would be the most important consideration of an investor, such is not the case. Instead, price conquers all. Sometimes the best deals require cash for major systems as well as structural repairs.That being said, every investor hopes to minimize capital outlays for the rehab. Paint and carpet is a must, and updated countertops and lighting fixtures are almost always part of the needed work. Beyond that, the house becomes less attractive. Smart investors are experts at estimating overall repair costs. And finally,
3. NEIGHBORHOOD Investors always look for pride of ownership in the neighborhood. In other words, is this the kind of area where a typical buyer or renter would want to live once the renovation is complete? If the answer is no, then all other factors become less important.Graffiti in the community, junk cars littering the yards, "boarded up" or vacant homes are all indications of problems in the neighborhood. Wise investors try to avoid these signs.The good news is that Atlanta's investor community is working hard to absorb this glut of bank-owned homes. The question no one can answer is when the supply of these homes will begin to decline.
Last week we saw that some 35 percent of home sales during the past year were bank-owned foreclosures or government-owned resales. That is a huge increase from just a few years ago when sales of these homes were not a significant part of the Atlanta market.Two factors cause these homes to sell at dramatic discounts:* Lenders and government agencies are charged with disposal of these properties regardless of price. These sellers simply do not have the luxury of waiting until the market improves; and* These same sellers have a strict policy of selling the properties in "as-is" condition, meaning no repairs and no disclosure statements. The buyer takes all the risk. As a result, the only potential buyers are investors looking for a bargain.So, what are the specific characteristics investors look for in today's market? There are many, but the main three are:
1. A LOW PRICE This is the most important part of the equation. The acquisition price needs to be low enough to cover all needed repairs, carrying costs, marketing expenses and still represent a bargain to the end consumer. Whether the investor intends to resell to an owner-occupant, or hopes to rent for long-term appreciation, the price paid for the acquisition is critical to all later profitability.In the case of Atlanta's post-foreclosure marketplace, investors have found a "market bottom." In other words, almost anything will sell very quickly if it is offered in the $30,000 to $40,000 range. Furthermore, the market is getting hotter.
2. SCOPE OF REPAIRS While the uninitiated might think that the level of repairs necessary would be the most important consideration of an investor, such is not the case. Instead, price conquers all. Sometimes the best deals require cash for major systems as well as structural repairs.That being said, every investor hopes to minimize capital outlays for the rehab. Paint and carpet is a must, and updated countertops and lighting fixtures are almost always part of the needed work. Beyond that, the house becomes less attractive. Smart investors are experts at estimating overall repair costs. And finally,
3. NEIGHBORHOOD Investors always look for pride of ownership in the neighborhood. In other words, is this the kind of area where a typical buyer or renter would want to live once the renovation is complete? If the answer is no, then all other factors become less important.Graffiti in the community, junk cars littering the yards, "boarded up" or vacant homes are all indications of problems in the neighborhood. Wise investors try to avoid these signs.The good news is that Atlanta's investor community is working hard to absorb this glut of bank-owned homes. The question no one can answer is when the supply of these homes will begin to decline.
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