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 For
the ninth month in a row, the number of pending sales nationwide is up.
In fact, there were 66% more residential sales on our island this
November over last. Even vacant land sales were up last month. While
the median price island-wide rose slightly last month, many areas of
Hawaii Island are still experiencing downward pressure on pricing. No conversation about the catalyst for the increase in market activity would be complete without including the first-time homebuyers tax credit.
Originally set to expire on November 30th, the credit was not only
extended but has been enhanced to include a significant credit for
current homeowners as well. Of course, no government give-away would be
complete without a couple dozen caveats so here’s some to get you
started…- There are many idiosyncrasies so be sure to consult your tax adviser.
- Neither credit applies to purchases over $800,000.
- Income limits apply to both programs.
- Single buyers cannot make more than $125,000 and married couples must not make more than $220,000. This is actually an increase over the previous program which capped income at $75,000 and $150,000.
- Partial credit is available until earnings exceed $145,000 and $245,000 respectively.
- Remember, a first time homebuyer is defined as anyone who has not owned a home in the past 3 years. For married couples, this applies to either spouse.
- In order to qualify for the $6500 credit, existing homeowners must have lived in their current home for five consecutive years out of the last eight. The home can either be sold or vacated which seems to indicate that changing use to rental is acceptable. The program is set to expire on April 30th but as long as the contract is in effect on April 30th, closing can occur as late as July 1st.
- Any credit is subject to re-capture if the home is sold within three years of purchase.
- The sales price must be at least $80,000 to receive full credit.
- The beauty of the “credit” is that it directly offsets taxes due. The remaining portion, if any, is sent directly to the purchaser… This means that one of Santa’s helpers could be delivering a belated Christmas present to almost anyone who purchases a home by the end of April!
But is the credit r eally
responsible for market improvement? Other factors such as incredibly
low interest rates and less “Eeyore talk” (less negative talk) could
also be impacting sales numbers. If the tax credit is indeed fueling a
housing turn-around we should see closed sales drop off sharply between
mid-to-end January. This would have been the time during which buyers
no longer expected to receive the original credit
but decided to purchase anyway. If these numbers don’t fall
significantly, it could be a real sign that we have, in fact, entered a
period of recovery. So whether you are thinking of buying a ho-ho-home,
keeping your eye on the market, or just watching the calendar, it’s
probably time to get ready because after what’s been a very long year
for us all, it seems that at last Here Comes Santa Claus!
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