Orange County Home Buyer Affordability Index Improves Dramatically!

The California Association of Realtors (C.A.R.) just released a report that shows the percentage of households that could now afford to buy an entry-level home in Orange County, CA grew to 48% in the fourth quarter of 2008. A huge improvement as compared to the 27% reported for the same period a year ago. Just two years ago the index showed that home affordability was at an all time low of 11% of households!

California as a whole also showed a large increase in affordability. The state in total checked in with a household entry level affordability index of 59% as compared to 33% just one year ago!

As we become more in line with home affordability with other states, we could soon see an influx of people relocating from out-of -state. California will always be a highly desired place to live due to the climate and proximity to sandy beaches and therefore real estate will always sell at a premium to many other states…..just not as a high a premium as we were use to seeing over the last couple of years.

Is the premium now low enough to attract an influx of home buyers? Only time will tell!

California Passes $10,000 New Home Buyer Tax Credit

The state of California just passed a $10,000 tax credit for any home buyer that buys a newly built home.

I thought the state was broke? Where is this money coming from? Why only newly built homes? These are questions a lot of Californians are asking?

The state believes that building a new home generates more tax revenues than the credit will cost the state. The CBIA (California Building Industry Association) stated that a study co-authored by a former state finance director shows that, “on average, every home built in California generates $16,000 in state revenues and another $3,000 in revenues to local governments. That means that even after providing the tax credit, the state will receive a net $6,000 in additional revenues. Furthermore, the $16,000 will be generated when the home is built, and the credit will be spread over three years.”

Now, if you are a home buyer shopping for a newly built home, this is going to help you out tremendously (along with the home builders). And if you are a first time home buyer you also are eligible for the $8,000 tax credit from the federal government! $18,000 in total tax credits!!!

Here are some of the specifics behind the state tax credit.

• The state tax credit is for $10,000 or 5 percent of the purchase price of a newly built home, whichever is less.

• The home must be the principal residence of the home buyer, and the sale must close between March 1, 2009 and March 1, 2010.

• The credit will be provided in equal amounts (up to $3,333) per year, over three successive tax years. It will begin with the year the purchase is made.

• The taxpayer must live in the home as their principal residence for at least two years…. or he/she will have to repay the credit.

• State tax credits are limited to $100 million fund and is available on a first-come, first-served basis until the funds are exhausted. So it is recommended that if you are in the market for a brand new home you may not want to wait too long as the funds may run out.

If you would like to get additional information about this tax credit and find out about some of the incredible deals some of the local builders are offering home buyers in the area, click on the following link “CLICK HERE” .

Congress axes $15,000 Tax Credit

The proposed $15,000 tax credit looks more and more likely that it is going down to defeat from Congress. This is a drastic blow to what is needed to spur home buying and get home pricing stabilized.

But not all is lost! It looks likely that that a more modest tax credit of $7,500 to $8,000 will be passed. I’m not so sure that this is going to give much steam to the market as there is already a $7,500 tax credit in effect although it is really just a 15 year loan. The new tax credit is designed to be a tax deduction that is designed as a grant to any first time home buyer.

We’ll keep you up to date as more information comes about in stimulus bill.

Senate Approves $15,000 home buyer tax credit!

Tax Credit

I’ve been touting for some time now that the government needs to stimulate the economy with a big time tax credit to home buyers and now it looks like it may be coming!

The Senate today passed a tax credit of up to $15,000 for anyone who buys a house in 2009. Actually, the credit is for 10% of the purchase price up to $15,000. Obviously for us here in California that $15,000 will apply to just about any property as there are very few properties under $150K.

Previously the bill contained provisions for a tax credit of up to $7,500 for the purchase of a home but only for first time home buyers. The revised bill apparently does nto distinguish between a first time home buyer or a repeat home buyer as long as the home purchases a principle residence. No investment properties qualify.

Also, the previous bill was really just a 15 year interest free loan that needed to be paid back $500 per year. The amended bill is supposedly a real tax credit that does not have to be repaid (although there are some stipulations).

Here is the entire American Recovery and Reinvestment Act of 2009 in PDF format.

The Senate measure still needs to be passed and signed into law but I expect that will happen as soon as next week. Stay tuned….

Disclosure: I am not an tax expert , so please consult your CPA or tax adviser for additional information prior to purchasing a home.

*** Update – 2/15/09  -  $15,000 tax credit was rejected – $8,000 tax credit now being considered