2009 Feb 10th

Proposed $15,000 Home Buyer’s Tax Credit – Stay Tuned For Details

By Lori Turoff 

[email protected]

Hoboken Home Buyers May Save Some Moneydollar-sign-istock_000004731571xsmall

Yesterday’s fiscal stimulus bill included a very large tax credit for home buyers.  It does NOT seem to be limited to first time home buyers.  Now, the way that legislation works, is this – the House and Senate each have their own version of the bill.  Since both versions have now been approved by their respective chambers, they go into committee to be reconciled.  Once that happens, the full Senate has to vote to approve and President Obama sign the legislation for it to become law.   So it is too early to know how the final details will shake out.  For anyone in the process of buying a home or about to buy a home, however, this is an important development and you should stay informed.  It could mean some significant savings to you.

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  1. Tiger

    I heard that too. I heard it will remove the restriction on income, which would help a lot of people in our area since, let’s face it, if you can afford a 300K mortgage you are probably above the 75K annual income limit that the first $7.5K package had.

    I wonder though if we should hold off on filing taxes this year, or will it be next year anyway?

  2. Seller

    Here’s some detail about this proposed bill: http://money.cnn.com/2009/02/09/real_estate/tax_credit_near/index.htm?postversion=2009021007

  3. homeboken

    I don’t think the tax credit will do much. I am a potential buyer and I know I am not at all “stimulated” to make a purchase now.

    The only thing that will spur the market is when home values return to a reasonable multiple of income. Add to this the extremly volatile nature of the local economy,job market and local city solvency issues and the buyer is assuming large risks that they don’t currently have (assuming they do not currently own). $15k is not sufficient compensation for these risks.

  4. Joe

    This would be great if it happened.

    What about the restrictions for income made? Do you know where they stand on that?

  5. Lori Turoff

    Nothing is clear yet. It was set at, I believe, $75,000 for a single buyer or $150,000 for a couple. There is also a question as to whether there is a limit on the value of the purchased property to qualify for the credit. If that is kept down at the $150,000 number I heard tossed around it’s not going to be much use to any Hoboken buyers. We shall see. I’ll post more info as soon as I learn of it.
    – Lori

  6. Tiger

    Lori – According to WSJ the 150K should be the ‘limit’. So for example, if you buy an 80K property, you get $8K, $150K property, you get $15K, $200K property, you still get $15K.

    Yea it’s still to be determined, but the more I hear about it the more disappointing it gets. It is going to ‘sunset’ the previous stimulus package (which most of us don’t qualify for due to ‘income’), yet it’s only for purchases after the passing, meaning mid February and later, properties bought back in the original April 9th 2008 timeframe are not eligible :(

  7. Michael G

    Once Hoboken property values come down 40% or more from the high, then I may be stimulated to enter the market, with or without tax credit. When you can get me a million dollar apt for 600k, let me know…I will be interested in seeing it. Its not too far away, the NY\NJ market has seen nothing yet.

  8. DKzzzz

    The only thing that would move this market is tax abetment for the first 5 years and interest rates on primary residence at 4%.
    Both things were killed in the senate last week.
    This government is completely impotent and cannot function outside of special committees.

  9. Willy

    Hoboken buyers would realize no benefit.
    15k covers a year of condo assoc fees. It doesn’t cover half of one year’s property taxes. So from a cashflow perspective, this is a dangerous carrot for some and nothing more. To the majority, it’s a non-event.

    Anyone who finds they can benefit from this is probably staring at foreclosure four years from now. Is it better than nothing? Absolutely. But making anything more than that out of it as a motivator is a misdirected marketing “scheme.”

  10. DMA

    Willy: “15k covers a year of condo assoc fees. It doesn’t cover half of one year’s property taxes.”

    15k covers a year’s worth of property taxes for almost any condo in Hoboken except some of the very expensive Toll developments over $1mm.

    Michael G” “Once Hoboken property values come down 40% or more from the high, then I may be stimulated to enter the market, ”

    Wishful thinking. IF properties drop that much, that means we’ve entered into a worldwide catastrophe. Housing prices will be the least of your concerns.

  11. Kemo

    Also, please note that the stimulus plan provides up to $15,000 OR 10% of the purchase price, whichever is lower. Equally important is that this proposal will not requiring the tax credit to be paid back, like other provisions and proposals have required in the past.

    If passed, it will be a really good thing for the wealthy and “better offs” like (most of) us, but not a good deal for Americans as a whole.

  12. stan

    does anyone else have the same problem, where the entire left side of the comments section is unreadable beacuse the green border is blocking it? Right now I cannot read half of what I have written….

    If so, how do I fix it?

    Thanks

  13. Tiger

    Kemo, you are forgetting that (most of us) are not really wealthy per say, it is just that living expenses are way higher than anywhere else in the country. NY has just been ranked as the most expensive US city to live in, period! A distant second is San Fransisco.

    Another interesting statistic: $50K in Houston is equivalent $123K here, so really, I don’t think the first ‘income limit’ on the first bill was fair.

    Speaking of living standards, I know property in Hoboken is considered overpriced, but is it really? I have family in Houston and I’m very familiar with the area, your typical 2 BR condo costs in the region of $180K – 200$K for a DECENT (not ideal) location. Given the major living costs difference, is $450K for a 2BR in Hoboken really overpriced? Of course, I’m not talking about the mess we are in right now, but in general, in good times.

  14. Andy

    Having the same issue w/ not being able to read the comments because the green border is hiding it. Lori, can you have a look?

  15. Tiger

    Guys, it really depends on what browser you are using. This blog is based on wordpress, and the stylesheets are typically optimized for mozilla based browsers such as FireFox. Google Chrome is also a good choice. Internet Explorer (version 6.00 or earlier) might cause some problem.

    Between work and home I access this page using four different browsers, no issue on any of them.

  16. DKzzzzdkzzzz

    40% off Hoboken RE values = WW catastrophe?
    I guess you were not of the same opinion when Hoboken RE values balooned 92% in 4 years, there were no catastrophe then?
    Hoboken prices will be less than 400/sq.foot within this year.

  17. patk14

    Agreed. A retreat to 2000/2001 RE prices in Hoboken would not be the end of the world. Remember, despite the tech wreck, the economy was not too bad back in those days. Much worse today…

  18. Tiger

    The 40% drop or the 2000/2001 prices are all valid options, that’s very true. However, let’s not forget that the reason prices fell are due to overall economy and market condition; in California and all prices are over 30% down, and still diving. This is due to the fundamental problem of over development.

    This area is still very desirable to live in (except of course if our taxes continue to rise out of control), however the problem is that people not longer can/want to put money in it. Which is understandable really.

    That’s why I expect -and that’s only an opinion- for properties to continue to drop, but when compared to nationwide average, we’ll still be ahead. I don’t expect a violent upswing, I think everyone leaned a lesson, but I expect a speedier recovery than the rest of the nation.

  19. rob

    The $15K tax credit was cut from the finalized stimulus bill that just passed

  20. DKzzzzdkzzzzdkzzzz

    Good riddance, it was useless tax credit in a first place..
    Next up: hyperinflation after dust settles.

    P.S. So after all I could have been wrong and we could see $200,000 /sq. foot in Hoboken, alas no one would be cheering those prices:)

  21. Tiger

    To be honest i was very excited about it first, but then I realized it’s just a costly band-aid of the problem, so in a way I’m glad it’s gone.

    I might be nai-eve in my theory, but the way I see it the average American homebuyer is now struggling to finance an ARM loan after the reset, why not make it easier (AND CHEAPER) for them to refinance to something like the 30 year fixed mortgage?

    I travel quite a bit for my job (Just this past week was in Seattle) and I have friends from almost every corner; almost everyone wishes to go for a lower rate but then again NO ONE is willing to pay another $10K or so for closing and locking a lower rate.

    Maybe once people can afford their homes, they won’t be desperate to sell, and the market can rebound, slowly, but surely, and definitely the right way.

  22. Kemo

    Tiger,

    I just refinanced and it’s more like $6k than $10k and I’ll recoup that money in less than 18 months. Also, where did you get your stat that $50k in Houston is $123k in Hoboken?

  23. Tiger

    Congratulations Kemo, well I’m glad to hear that it’s $6K, I’m considering refinancing myself it will save me over $300. BTW did you need a lawyer to refinance?

    Anyway, I still think there’s a big overhead before people can lower their monthly payments in general, hence I think it would be great if there’s a payment plan for those costs.

    As for my figure, it’s actually from the WSJ, in an article posted a couple of days ago here under the comments (something about bankers not being able to live on only $500K). $123K in Manhattan (not Hoboken- I apologize if I confused you) is equivalent to $50K in Houston according to them.

  24. DMA

    DKZ: “40% off Hoboken RE values = WW catastrophe?
    I guess you were not of the same opinion when Hoboken RE values balooned 92% in 4 years, there were no catastrophe then?
    Hoboken prices will be less than 400/sq.foot within this year.”

    Why would RE values ballooning 92% in 4 years be the result of a catastrophe? I’m missing your point here, if you have one even.

    Also, I have no doubt that 400/sq.foot will be and is the price for many condos, but are you trying to argue that that will be the average?

    It would help with the discussion if you made your thoughts more precise and clear. Thanks.

  25. Michael G

    Umm, last time I checked, we are in a world wide catastrophe.

    I actually am planning to lower my target to 50%.

    Avg 1 Br – 250K
    Avg 2 BR – 400k
    Avg 3 BR – 550k

    Lets mark this post and come back to it in a year or so.

  26. Willy

    Given my skepticism surrounding 15k in this environment, 8k (which is how the bill looks now) is NO EFFECT!

  27. DMA

    Michael G,

    If you’re going to make silly comments at least get your numbers straight. If you think that a 50% discount to current average prices would be:
    1BD – 250k
    2BD – 400k
    3BD – 550k

    Then you think the current average prices are:
    1BD – 500k
    2BD – 800k
    3BD – 1.1MM

    Not sure where you’re living, but those certainly aren’t current Hoboken averages.

    In fact, based on your #s you’re predicting a much smaller drop than 50%.

    Come on people, let’s think before posting.

  28. Kemo

    Tiger,
    Our refi gave us the right to refuse an attorney, which we did; we’re going thru our mortgage broker so we’re certain it’s all up and up. The closing cost do hurt because we only bought in late Oct (luckily at a huge discount) plus we’re saving almost 400/mo, so that feels really good. IMHO, I think eventually rates will be lowered to 4% within 6-18 months and if that happens I’ll refi again.

  29. Lori Turoff

    Would the people who are having problems viewing my site or the comments kindly email me and let me know what browser you’re using? I need to pass it on to my tech people whom I pay a considerable sum to maintain this site. I’m quite upset that you’ve had problems and hope to fix it immediately. Please accept my apology for the inconvenience. In the meantime, if you try firefox or safari (for mac) you should be OK. But I will get it fixed.
    Thanks much,
    Lori

  30. Lori Turoff

    It is my understanding that in NJ one does NOT need to have counsel to do a real estate deal – purchase or refi. It’s ‘recommended’ but not required. I’ll confirm that.

    I think people talking about Hoboken prices still have to recognize that some of our run up in prices over the past 10 years were what I will call ‘structural’. That is, substantial improvements made to living in Hoboken which make it a more attractive place to live. Things like all the supermarkets which did not exist 10 years ago. Upsacale shops and restaurants, improved housing stock, the NY Waterway ferry, the park along the river, etc. Agreed, we’ve got some serious problems now (taxes, our local financial mess) and those will hurt Hoboken just as the structural improvements helped Hoboken but I don’t believe we’re going back to numbers from 10 years ago. We are very fortunate that our NY metro area is nowhere near as bad off as, let’s say, Tampa. Take a look at this week’s issue of The New Yorker – there’s a great article on Florida foreclosures.

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