Federal Tax Incentive Gets Market Moving

Story from Newburyport News

There is a tax credit to stimulate the real estate market, and it's working. In February, a federal tax credit for first-time home buyers of $8,000 was passed into law, and the effect has been noticeable.

Basically, if you haven't owned a home for the last three years and your income is within the prescribed limits, if you buy a home before Dec. 1, you can claim an $8,000 credit against your 2009 income tax return. That's a chunk of cash in your pocket to buy a home. And because the FHA is giving mortgages with as little as 3.5 percent down to people with reasonable credit, the barriers to buying a home are low.

So things have been happening. The demand for lower-priced properties — less than $300,000 — has increased substantially. Condos are selling. Renters who never before thought they could buy their own home are finding out that now they can! And while buyers can't borrow the down payment, it CAN be a gift from a relative.

Some homeowners are realizing that now is a great time to sell because of this new demand. They have been catching on that now is a good time to put their starter home on the market and move on — it's a great time to move up because the homes in the $300K to $600K range are well priced and the interest rates are low.

Buyer and seller services have never been better — the best Realtors have hung in there through the slump and are busy with the growing momentum.

This government stimulus is well thought out and having a beneficial and stabilizing effect on the real estate market. While no one expects prices to go back to the levels of a few years ago any time in the foreseeable future, prices are now at the 2001-2002 levels, which makes a lot more sense. Unless you bought your home or refinanced it to the max at the peak of a giddy market, when many people — including the lending industry — unfortunately chose to ignore the old adage "it's too good to be true," you are probably in good shape to thoughtfully plan your home ownership future. Once again, we do have something to look forward to!