By AUSTIN KILGORE
September 22, 2009 10:16 AM CST

[Update 1: Clarifies location of Campbell Communications]

A new study estimates the $8,000 first-time homebuyer federal tax credit resulted in 357,000 additional home sales so far in 2009.

The study, released by Campbell Surveys, a division of Washington, DC-based marketing and public relations firm Campbell Communications, conducted surveys of real estate agents and calculated the figure by comparing the rate of first-time buyers during the first two months of the year both before and after the tax credit was instituted.

The monthly rate of first-time buyers increased from 32% in January and February to 43% every other month of the year except July, when it was 42%.

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First time home buyers really have it make this year, especially in Austin.  Historically, the current “even market” is the closest we’ve had to a buyer’s market in Austin.  Pair great deals (not half-price deals like Las Vegas & Pheonix, but great deals for Austin real estate) with $8,000 free from Uncle Sam then add amazingly low interest rates beginning in the 4%-5% range… if there is anyone out there who has been considering buying their first home in Austin, now is definitely the time to buy.

I’m happy to go over the numbers with anyone to see how much money you are really saving.  Here’s a rough idea:

• 5-10% off the price of the home of what we would have seen if homes had continued to appreciate at their pre-2008 rate coupled with the motivations of frustrated sellers
• $8000 from Uncle Sam that can be used toward your downpayment in most cases (you no longer need to save as much)
• Interest rates in the 4%+ range instead of the early 2000′s or predicted 2010 6%+ range means lower monthly mortgage payments which can be $200 or more each month, or $2400 for each year you spend in the home

What you need:

• A decent credit score (sub-prime/high-risk mortgages are a thing of the past)
  
• Some cash for inspections & earnest money
• An income that can support mortgage payments – lenders prefer that your mortgage be less than 28% of your monthly income and total payments (mortgage + car, etc) to be leww than 35% of your monthly income
  

After years of double-digit increases, though, some school disticts see valuations drop.

By Tim Eaton , Shonda Novak
AMERICAN-STATESMAN STAFF

Residential property appraisals rose by an average 3.8 percent in Travis County this year, less than a third of last year’s increase and the smallest jump in five years, the Travis Central Appraisal District reported Wednesday.

Countywide, the average home value was $295,744, the district said. In 2008, the average valuation rose 12.2 percent.

In the City of Austin, the average valuation rose 4.5 percent this year to $278,027, compared with a 12.8 percent increase last year.

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1. First-Time Home Buyer Tax Credit

   In order to pass the $787 Federal Stimulus Plan, the proposed $15,000 first- time home buyer tax credit was rolled back to $8,000. While that might not entice you to buy a home, Congress did adjust the terms such that the $8,000 loan doesn’t have to be repaid so long as the homeowner stays put for three years.

2. Higher Reverse Mortgage Loan Limits

   The Federal Housing Administration previously had $417,000 limits on what they’d insure, but bumping it up to $625,000 means that many more homeowners with depressed stock portfolios and thus little money to draw on will be able to tap into home equity cash.

3. Higher Conforming Loan Limit

   The government is also empowering the Federal Housing Authority to insure more expensive loans by upping the conforming loan limit to $729,750. For those under that new umbrella it means access to lower mortgage rates, because this insurance makes these loans less risky for banks to issue.

4. Underwater Mortgages

   At around 4.8%, mortgage rates are the lowest they’ve been since the Second World War. Ordinarily, those with debt in excess of their home’s value have not been able to refinance. In an effort to help underwater homeowners, those with a maximum of 105% debt on their home’s value are eligible to refinance as long as Fannie Mae or Freddie Mac backs their loans.

5. Lower Interest Rates

   Homeowners who are in owner-occupied units, not those that own second homes, and didn’t misrepresent their income or utilize no-documentation loans, are eligible for a five-year grace period where their mortgage rates are dropped such that monthly payments equal 31% of gross income if the loan is held by Freddie or Fannie and was written before January 2009. Make your payments on time for those five years and you’ll get $1,000 per year in bonuses.

6. Geothermal Heat Pumps

   In October, Congress issued a credit to cover 30% of cosys of geothermal heaters up to $3,000, yet few were taking advantage. The reason? Geothermal heat pumps often cost $20,000 to buy and install, making $3,000 nice, but not helpful enough. The stimulus package removed the $3,000 cap, but left the 30% of costs benefit.

7. Solar Hot Water

   Solar water systems are eligible for a 30% credit of the initial purchase and installation cost. That’s good news as systems often run between $6,000 and $10,000. The credit is available through 2016, a sizable window to cash in on the benefits of lower cost energy, and is available to those who use the solar system to heat their home’s water, not that of hot tubs or pools.

8. Weatherproofing

   By design, much of the stimulus money will be doled out through programs at the state level, including $5 billion for weatherproofing homes. Homeowners buying foam sealants, caulk and weather stripping are eligible for up to $1,500 in credits for improving the energy envelope of their home, available through 2016.

9. Fuel Cells

   Not many people have fuel cell technology (essentially a giant battery system) in their homes, but if you have enough space, for a cell or microturbine system, the government will kick you back 30% of your costs up to $1,500 per 0.5 kilowatts of power capacity. Put simply, the more energy you can generate, the bigger your credit.

10. Windows, Doors & Roofs

    In bringing back the tax credits of 2007, the government will cover 30% of costs up to $5,000 for windows, doors and roofs that improve energy efficiency. However, homeowners will have to demonstrate that their improvements are expected to last at least five years through the inclusion of a product warranty included with their tax form.

Here are the basics of the up to $8,000 tax credit for first-time home buyers:

• Only “first time home buyers” are eligible, but if you or your spouse haven’t owned a home (“principal residence”) in at least three years, you now re-qualify as a “first time buyer”.
• If you co-purchase with another individual, such as a parent, only your eligibility matters.
• You can purchase a new or resale home, but you must purchase the home as your principal residence (where you live).
• You do not have to repay this tax credit, it is not a loan like the previous legislation!
• You must purchase a home on/after January 1, 2009 and before December 1, 2009.  Purchase your new home this year January – November.  Don’t wait until 2010 or even December 2009!  2008 home purchases are not eligible, but may be eligible for 2008 credits/deductions.  You can use your 2009 purchase on your 2008 taxes.
• Your tax credit is 10% of the cost of the home, up to $8,000.  If you purchase a $200,000 home, your tax credit is $8,000.  If you purchase a $60,000 home, your tax credit is $6,000.
• To qualify for the full credit, a single person must make no more that $75,000 and a married couple must make no more than $150,000.  Partial credits are available if you earn beyond this limit.  If you earn beyond this limit, I can help you determine your potential credit.
• Claim your credit on IRS form 5405 & Line 60 of your 1040 when you file your 2009 taxes early in 2010 or when you file your 2008 taxes this year (this can be used on your 2008 taxes!).
• If you owe less in taxes than your credit amount, the IRS will send you a refund check.

Changes to Capital Gains Tax Relief Laws – Before, any homeowner who lived in a home for 2 of the past 5 years could enjoy up to a $250,000 profit tax-free (up to $500,000 for married couples).

Beginning January 1, 2009, this changes to a ration.  Now, you must use this equation:  Captital Gains Exclusion = Profit from sale of home = # of days the home was primary / # of days the home was owned. In simple terms, that means that if you live in the home 100% of the time, you can enjoy your profits capital gains free, otherwise you may need to split the difference with the government.

For example, let’s say you purchase a home for $300,000 on September 1st of this year.  You live in the home for 1.5 years, then rent it out for a year, then move back in for an additional 6 months.  You sell the home 3 years after you purchased it for $500,000.

Profit = $200,000
# of days the home was primary = 730 Days
# of days the home was owned = 1095 Days
730/1095 = 2/3 = Amount of the profit that is Capital Gains Free = $133,333.33

In this example, you would pay Capital Gains taxes on 1/3 of the profit or $66,666.67     The federal portion of the Capital Gains tax is currently 15%, so the owner of this example would owe $10,000 to the federal government for this profit.  Sure beats $30,000, but this may entice you into not hopping from one of your rental properties to the next and selling them after living in them for two years instead.

A benefit to this reform is the ability to claim an exemption on more than $250,000 per person.  Many say this is a benefit to the rich, but as a proponent of flat taxes (and an opponent to any socialist-type laws), I am in favor.