Michelle Millikin

Archive for the ‘Tax Credit’ Category

The main crisis facing our housing market is the fact that more than 20 percent of homeowners are upside down on their mortgage.  This causes foreclosures, prevents home owners from selling and stifles overall consumer spending.  According to CoreLogic, as of June 2011, underwater home owners owed $709 billion more on their mortgages than their homes were worth. Now add two more facts:  Banks have a massive shadow inventory of homes not yet released to the market and the push for buyer-assistance programs has fallen drastically short.

Principal reduction would essentially require the banks to reduce the amount owed on a property to be reflective of the property’s current value and adjust the interest charged to a current rate.  This would create a positive effect:  Mortgage payments would go down, families would stay within their homes, neighborhoods/communities would remain vibtrant, consumer spending would increase.  As consumer demand grew, so would construction, job creation and economic growth.

Banks should be incentivized by this idea.  They have an estimated 5-10 million in shadow inventory to protect.  If another wave of defaults comes through, this inventory will lose even more value.

This program would need to be limited to only households facing imminent foreclosure or other serious financial hardship.

I am in support of investigating this proposal further.  Many of these lending institutions contributed to this problem with their securitization schemes and yet were rescued with trillions of taxpayer-funded bailout money.  According to St. Louis Fed, the banks currently have 1.64 trillion in the Federal Reserve accounts that could be allocated to such a program.

I hope this Tax Credit Extension will spur the Wausau Real Estate Market into gear!

Many of the original parameters of the Tax Credit remain the same:

If you are a First-time Home Buyer or haven’t owned a home in 3 years you may qualify for the credit, which is 10% of the purchase price, up to $8000. If you own a home and have lived there for more than 5 years, your new home purchase will award you a $6500 tax credit.

The deadline for an accepted offer to purchase has been extended to April 30, 2010 and the transaction must be closed before June 30, 2010. The government has stressed that this will not be extended further.

The amount of income someone can earn and qualify for the full amount of the credit has been increased. Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit as long as their income does not exceed $145,000. Joint filers who earn up to $225,000 are eligible for the total credit amount. A partial credit is allowed up to $245,000.

The home cannot exceed the purchase price of $800,000.

If you know of anyone within the Wausau Real Estate Market who would be interested in learning about this opportunity, please have them contact me. I have a great group of mortgage lenders to help us through the process!

As a Wausau Real Estate Broker, I have found this to be the hot question of the day. 

Yes, the bill is being strongly favored. 

No, it has not been officially accepted yet.  Many wish to know how the extension proposal has been modified. 

Here’s the abridged answer:

For first-time home buyers, the $8000 tax credit is to be extended to April 30, 2010 for an accepted contract and until June 30, 2010 for the transaction to officially close.

For existing home owners, who have owned their home for five years or more, they can use an expanded tax credit of $6500 toward the purchase of a new home.

The income limits have been increased to $125,000 for an individual and $225,000 for a joint filing.

You can use the credit on your 2009 or your 2010 income tax return.

The home purchase price cannot exceed $800,000.

As with the current credit, there is no repayment as long as the home you are purchasing is your primary residence for at least three years.

My opinion: 

I have some concern regarding the credit.  Many are forgetting the tax burden that will be applied to Americans to fund this program.  I find the program little more than a “shell game.”  The problem with the housing market isn’t the lack of sales, it is the lack of buyers to fill our exploding inventory.  Simply, there are far too many homes and not enough buyers to fill them.  The theory is that the housing market will be stimulated and somewhat resolved by people moving up in home value and renters turning to homeownership.  I fear there are just as many renters becoming buyers as there are home owners being foreclosed upon and becoming renters.  What has actually been resolved?

I propose there is a freeze on new construction.  (Reminder:  my husband is a contractor.)  There should be incentives for investors, builders and buyers to purchase vacant and foreclosed properties.  There should be generous incentives to repair and remodel these homes and make them competively energy efficient.  This would reduce inventory and restore existing neighborhoods.  It would also provide much needed income property for investors to house the many displaced families forced to rent that don’t fit into a traditional apartment or duplex.  With the necessary construction involved in the improvements, builders/contractors would have plenty of work to replace the lack of new home construction.

People are constantly tauting energy efficiency and green choices.  How about fixing the homes already in existance that are causing our housing inventory to be the highest in history and stop simply constructing more?  There are plenty of beautiful, existing neighborhoods that would be benefited with this mindset.

If Americans don’t wish to do this nationally, local governments should do it themselves to individually target their concern areas.