2009 Oct 29th

First Time Homebuyer Tax Credit Extended – Higher Income Threshold Will Help Hoboken Condo Buyers

Obama Supports Tax Credit Extension – Bill Almost Certain to Pass in Congress

Bloomberg reports that the previously enacted $8,000 first time homebuyer tax credit is highly likely to be extended to April of 2010.  More importantly for Hoboken buyers, the income limit will be raised so that a single person making up to $125,000 will be eligible for the tax break instead of the current limit of $75,000.  The limit for married couples will rise to $225,000 from the current $125,000.  This is huge for Hoboken buyers, most of whom don’t qualify under the current plan because their incomes are too high.   In addition, there will be a $6,500 credit for any primary residence purchase provided the owner has lived in the prior home for at least 5 years. More news should be available shortly.

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  1. Eric

    Anyone have any idea if the increase in income limits apply to people who bought after Jan. 1, 2009 but before this expansion (if it passes)? Thanks.

  2. homeboken

    Lori- what are thoughts of how the market will react in in May 2010 when the credit expires?

    I fear that this credit will become permanent eventually. Recall that the mortgage interest deduction was a temporary home stimulus measure at one time. Now it is permanent and removing it would destroy the incentive to own a home. This tax credit is headed for the same path.

  3. lori

    Here are some good Q & A’s from the Wall St. Journal about the proposed extension:
    http://blogs.wsj.com/developments/2009/10/29/qa-the-home-buyer-tax-credit-extension/

    If and when it expires, I don’t believe it will matter very much at all as so few Hoboken buyers are eligible.

  4. Senor

    My situation:

    I owned a Hoboken condo from 2007 – 2009, sold a few months ago, and am now in the market for a house. I haven’t been in my home for 5 years and I’m not a first-time buyer, so I don’t get any credit?

    I can see wanting to lure first-timers in, but what’s the thought process behind rewarding people who’ve been in their homes for a long time and not those who bought and sold “quickly”? I can honestly say that I’m on the fence about wanting to buy or not right now, but if I had a big tax credit, I would probably pull the trigger. Doesn’t the gov want to lure EVERYONE into a home?

  5. Mark

    Eric, I am also curious. I closed in May of this year and I don’t think I will qualify for the old credit. However I should qualify for the new credit if possible…

  6. bz

    Homeboken, I don’t think it will become permanent. By the way, the mortgage interest deduction isn’t permanent either. It has been extended many times in the past, but it’s definitely not permanent. There’s no guarantee that it will still be there in 5 or 10 years. Also, the mortgage interest deduction is meant to keep people as homeowners and to benefit the homeowners year after year. Its accumulated value is far more than $8000 that the one-time shot homeowner credit is worth.

  7. vreporter

    In Hoboken – as I’ve always said – this credit means nothing! If there is someone tempted to pull the trigger DUE TO THIS CREDIT, then they should reassess their financials before becoming the next victim of the residential crisis. Get real folks! Move to Detroit and ponder the credit.

  8. homeboken

    Lori – Did you write this artilcle? Because in the article it states, “this will be HUGE for Hoboken buyers” Then in your comments you state, it won’t matter since most Hoboken buyers don’t qualify?

    You give us some pretty insightful comments, no way you could author such contradictory statements right?

  9. TS

    Homeboken,

    I took her to mean that the expiration of the *current* tax credit plan won’t matter much to Hoboken since it cuts off at income levels under what typical Hoboken buyers earn. But that the proposed extension and *new* plan with widened income limits will be “huge”.

    Incidentally, I don’t think it will be huge, although one can never underestimate the power of psychological gimmicks.

  10. Lori

    Thanks, TS. Sorry if I was not clear. Let me rephrase – the old program did little for Hoboken buyers since most of them, especially to afford to buy in Hoboken, have income over the limit so they didn’t qualify. I happen to agree that if you’re making under $75k as a single or $125K as a couple, unless you’ve already saved a substantial amount to use as a down payment, you probably can’t afford to buy in Hoboken anyway. The new proposal with the much higher income limits, however, will be a huge bonus to first time Hoboken buyers because, in my opinion and experience, the typical first time Hoboken buyer is making a little over 100K and the typical couple just over 200K. Maybe “huge” was too enthusiastic a word. On a purchase of 400 to 500K, an $8,000 credit is a tiny drop in the bucket. Still, I’d rather have it than not. It will (almost) pay for a buyer’s closing costs. I don’t believe that will be a major deciding factor in whether potential buyers will act. I think the perceived health of the market is much more important in that regard.

  11. Guest

    I’d venture a guess that few people in the market for a reasonably-sized 2BR in Hoboken is in the income brackets stated here to qualify, and the amt seems nothing more than another give away to prevent a REAL recalculation of overpriced real estate.

    Kicking the can down the road once again. A big surprise.

    The reality is that this tax break affects the states that have had crushing losses an jobs and RE prices. Hedge-fund and NYC professional Hoboken is not the target for this incentive.

    My take as a buyer with a family looking in Hoboken is a big collective Yawn.

    Keep the temporary max limit increase to qualify for a jumbo conforming loan at 729K for a single family and $934 for a multi-family and then you might have something.

    But as of now, those limits that are critical to propping up Hoboken’s RE prices are set to expire (close before 11/16 or else your max “jumbo-conforming” limit rolls back 100K to 625K). This increases borrowing costs for the larger 800-1+ million dollar properties that finally saw some traction with the recent reflation trade.

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