Realtors pleased with credit extension effort
Say current incentive has had good impact
Local real estate agents are applauding a proposal in Congress to extend the first-time homebuyer tax credit until April and expand it to other buyers as well, saying it’s needed to sustain renewed momentum in the housing market.
“We believe that an extension of this credit is critical to the success of our overall economy,” said Bret Llewellyn, associate broker and branch manager for the Buffalo city office of RealtyUSA. “Home purchases are helping us dig out of this economic stagnation and the extension of the homebuyer tax credit will speed the overall economic recovery.”
U. S. senators are expected to consider legislation extending the tax credit through the end of April, and allowing so-called “step-up purchasers,” who have been in their current homes for at least five years, to benefit as well in buying a larger home.
That’s designed to not only maintain stronger home sales in the first tier of lower-priced homes, but also push sales in the next higher price range as well.
Realtors here say the market for homes over $400,000 is almost completely stalled. The theory behind the tax credit is that as the government encourages one home to be sold, the seller has to find a new, and often larger home, and so on up the chain.
“It’s stimulating two price ranges in our market. So it can be nothing but a benefit for every community in the nation,” said Isabel Robitaille, president and CEO of Robitaille Real Estate in Williamsville. “I don’t see a downside on it.”
The bill would still have to pass the House, but President Obama and his aides have also come out in favor of an extension, giving the concept an extra push. The current credit, enacted as part of stimulus legislation in February, expires Dec. 1.
“If it doesn’t happen, I think the economy will recover, but I think it’s a great piece of stimulus that will help people make a decision,” said RealtyUSA CEO Merle Whitehead. “To date, there’s been a lack of consumer confidence. That’s a huge ingredient for that move-up buyer.”
The $8,000 federal first-time homebuyer tax credit has been widely cited for reviving otherwise moribund home sales nationwide this summer, and then spurring secondary spending as consumers fixed up their homes.
The credit is equal to 10 percent of the value of the home, up to $8,000, but is reduced for higher-income homebuyers. It’s available to anyone who bought a single-family home, condominium, town home or co-op between Jan. 1 and Dec. 1, 2009, as long as they did not own a residence in the previous three years.
The National Association of Home Builders says the credit has led to 150,000 new and existing home sales, while the National Association of Realtors asserts that 350,000 to 400,000 people bought homes when they wouldn’t have.
In particular, local realtors say older communities with modest homes priced between $70,000 and $160,000, such as Buffalo, Tonawanda, Kenmore, West Seneca and similar areas, “benefited dramatically,” Llewellyn said. RealtyUSA’s Tonawanda office had five straight months of more than $1 million in sales — unusual for that office.
“I’ve been hoping something could continue on this, because it has been a great stimulus,” Robitaille said. “It’s worked here. It’s made a real difference.”
Such activity has kept real estate agents, lenders, appraisers, lawyers and others involved in the process quite busy. Indeed, on Friday, the last business day of the month, the room at the Erie County Clerk’s office that is used for closings was packed, “reminiscent of the heydays of 2003 to 2004,” said County Clerk Kathy Hochul.
“It’s had the desired effect,” she said. “We haven’t seen this kind of activity in years.”
Economists have also said that every home sold with this credit actually adds $62,000 to the economy, as people then repair and furnish their new homes, and hire contractors to help. About 17 people are involved in a typical real estate transaction, said RealtyUSA associate broker and branch manager Miriam Treger.
“People buy homes and start the process of fixing them up. Put in the taxes, attorneys, home inspectors, stagers, home decorators, furniture stores and retail stores, and you can see the benefit and trickle-down effect,” Llewellyn said.
But the terms of the current credit meant consumers had until Nov. 30 to close on their homes in order to qualify. That generally meant they had to have a home under contract by the end of September, giving them a 60-day window to complete the deal.
“People have been scrambling to try to get in under the wire,” Robitaille said.
And even people who did so are now worried that they still may not close in time because of delays at some lenders caused by overburdened staff, tighter underwriting and extra-cautious home appraisers.
Locally, both HSBC Mortgage Corp. and M&T Bank Corp. say they are not having problems. But real estate agents are worried that some of their clients with other lenders may need more time.
“There’s certain ones that are falling very close in the process to this deadline,” said Barry
J. Chubb, founder and president of Coldwell Banker Chubb Real Estate in Williamsville.
“I know that many of the banks have put special processes in the works to sort of move these transactions to the top of the pile, but we definitely have a number that will be coming right down to the wire. They’ll be very upset if they don’t hit that end-of-the-month deadline,” Chubb said.
Under the current proposal, the new credit would be available on home purchases under contract by April 30, although borrowers would have 60 days more in which to close the sale, effectively extending it through the end of June.
However, the amount of the credit would be lowered to a maximum of $7,290 for first-time buyers and would be capped at $6,500 for step-up buyers.
First-time homebuyers would still have to earn less than $75,000 for individuals and $150,000 for couples in order to get the full credit. Step-up buyers, however, could earn up to $125,000 for individuals and $225,000 for couples, enabling higher-income families to participate. The new credit would be limited to homes of $800,000 or less.
“I’m hoping the expansion of the tax credit to move-up buyers would really be significant,” Whitehead said. “I thought when they created the first tax credit that it would trickle up, but it really didn’t trickle up as much as people hoped, so I think that’s why they added this extra piece of stimulus.”
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