Is It a Great Time To Buy?

A lot of people are unsure as to whether or not it is a good time to buy. Properties are down substantially from the height of the market. Even so, high taxes and fear that the market might go down further are causing some people to hesitate. As realtors, we are seeing properties sell steadily in this market if the property is well-priced. There is more supply than usual and unrenovated condos are having the hardest time selling. I believe that this is the best time to buy in years. However, it does pay to pay attention to taxes. Many savvy sellers have appealed their taxes and the city is routinely lowering taxes that are appealed.

Friday Update on the Condo Market

ONE BEDROOM LISTINGS
188 ACTIVE one bedroom listings
$386,000 is the average active listing price
38 DABOs (Under Contracts)
$351,000 average price
27 SOLDS since Jan 1
$412,000 average price

TWO BEDROOM LISTINGS
258 ACTIVE two bedroom listings
$367,400 average price
78 DABOs
$439,000
55 SOLD listings since Jan 1
$486,000 average price

THREE BEDROOM LISTINGS
39 ACTIVE
$956,400 average price (ouch!)
22 DABOs
$723,600 average price
10 SOLDs since Jan 1
$834,000 average sale price

How the Bailout is affecting Mortgages

According to a detailed article by Matt Tiabbi for Rolling Stone, ominously entitled "Wallstreet's Bailout Hustle", the Federal government has been printing more money and using it "to buy mortgage-backed securities in an effort to spur home lending" (Rollingstone's March 4th issue, p. 53). This opened up huge avenues of money-making for the large banks. However, the Fed is planning on trying to get out of the home lending market, beginning this month. Per the article, home lending money is going to dry up again. Loans will be fewer and harder to get. "The Mortgage Bankers Association expects the number of new residential mortgages to plunge by 40 percent this year" (RS p52). FHA lending, which really helped for awhile, is tightening. Spot-assessing in order to do an FHA loan is no longer possible, having stopped February 1.

What does this mean for buyers? Money is going to tighten up again. The larger the down payment and the better your credit score, the more likely your loan will be approved. Loans with less than 20% down will be much harder to get.

What does this mean for sellers? Keep in mind that appraisals will be more stringent and since there is a smaller pool of sales to choose from, even if you get a high number on your property, it may not appraise. Be realistic about the value of your home. Carefully go over the comparables and price your home accordingly.

All the Info on the Tax Credit for New Buyers and Repeat Buyers

American Recovery and Reinvestment Act of 2009:

The first extension and expansion of the tax credit was introduced with the American Recovery and Reinvestment Act of 2009. This law changed the time period to purchase the principal residence, the amount of the credit, repayment terms, and the tax year for claiming the credit.

Taxpayers who purchased a home between January 1, 2009 and November 30, 2009 can still claim a credit of 10% of the purchase price but up to a maximum of $8,000 ($4,000 for married filing separately). A home constructed by the taxpayer only qualifies for the credit if the taxpayer occupies it no later than November 30, 2009. The credit is not required to be paid back so repayment terms are not applicable. However, the home must remain the taxpayer’s principal residence for at least 36 months after the date of purchase. Taxpayers who qualify for the 2009 credit have the option to claim the credit on either their 2008 or 2009 tax return. If a 2008 return had already been filed, an amended return can be submitted.

Worker, Homeowner and Business Assistance Act of 2009:

The final extension and expansion, as it stands today, was introduced with the Worker, Homeowner and Business Assistance Act of 2009. This law changed the deadline to purchase and close on a home, authorized the credit for long-time homeowners buying a replacement principal residence, raised the income limitations for claiming the credit, and again the tax year for claiming the credit.

Under this version an eligible taxpayer must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2010 and close on the home by June 30, 2010. Long-time residents, those that do not qualify as first-time buyers, are allowed a credit of up to $6,500 if they owned and used the same home as a principal or primary residence for at least five consecutive years of the eight year period ending on the date of purchase of a new home as a principal residence. Individuals with income up to $124,999 received the full credit, the credit was phased out for individuals with income between $125,000 and $145,000, and individuals with income in excess of $145,000 do not qualify for any part of the credit. Joint filers with income up to $224,999 received the full credit, the credit was phased out for joint filers with income between $225,000 and $245,000, and joint filers with income in excess of $245,000 did not qualify for any part of the credit. For all qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 tax return.

Under this new law several restrictions go into effect for purchases after November 6, 2009. Dependents are not eligible to claim the credit, no credit is available if the purchase price of the home is over $800,000, a purchaser must be at least 18 years of age on the date of purchase.

This article was written by Salvatore M. Grasso, CPA of Grasso & Company, LLC. It is not comprehensive and not intended to constitute legal or tax advice but only to inform the reader. The application of tax laws may vary amongst taxpayers. Accordingly, a qualified professional should be consulted with in the application of these rules to ensure they are applied properly.

The Proof is in the DABOs

So it looks like we are off and running! Though the DABOs are not high (134 as of yesterday in Hoboken...these are the properties that are under contract but not yet closed), for January, it isn't bad and we are seeing properties that are priced well selling at a relatively encouraging rate. With the first time buyer's tax credit at $8,000 and the second time buyer's credit at $6500, buyers are out and looking. And buying...which is a big improvement over this time last year. Properties under $600,000 are getting the most exposure and newer renovation fairs better than older. This promises to be a healthy Spring market with still excellent prices for buyers.

The New Year

What will the new year bring? This is the question I hear from both buyers and sellers. Buyers ask me if they market is done falling and sellers are are wondering if prices will hold. Some recent credible real estate studies are claiming that the market could drop as much as 9% more, but I think this is very unlikely in this urban area, where both the stock market and the job market are slowly beginning to recover.

It will not be quick recovery. We expect it to take years. However, not being a soothsayer, and going by my experiences in Hoboken over the last twelve years, I believe that the market has stopped falling. If prices do drop any further, I think it will definitely be less than a 5% drop. Though are prices were inflated at the height of the market, they were not as inflated as New York City, and Hoboken has seen the most dramatic drop in prices in the last thirty years, a price drop of 20% from the height of the market. I believe this is an excellent time to buy, while the rates remain low. There are some great properties on the market for very reasonable prices (for Hoboken).

If you need to sell, it may not be ideal but if you are buying after selling, that is your opportunity to save money...on the buying end. You will get less money for your home than two years ago, but you will get more house than you might have been able to afford on the purchase of a new home.