Why First-time Buyer Should Buy Home in 2009

You Can’t Afford NOT to Buy a Home

You may wonder whether it is worthwhile to wait to purchase
your home until prices are at their lowest. The prices are very low now.
Read my previous blogs.

However, prices are not the only factor that should drive your decision.
Currently, interest rates are at generational lows that greatly improve the affordability of homes.

Further on the annual cost table, you can see that even
if home prices decline, the possible tax savings of owning a
home lead to a lower cost for the buyer, not the renter.

Also, there are special, additional tax benefits for first time home buyers that may be available for a limited time only in 2009.

Finally, and most importantly, when you have made the decision to commit to homeownership because you are financially ready, market conditions are a secondary concern.



Tax advantages

Over the last ten years, the cost of rental housing in the U.S. has increased an average of 3.5% per year. If that trend continues, that means that an apartment or home renting for $1,000 per month will cost more than $1,300 a month in ten years.
If you rent the same home for ten years, the total amount you would pay for rent will equal $140,777.

None of that $140,777 ( rental payments over 10 years) is returned to you, either through savings or as an investment.
Homeownership, on the other hand, has tax advantages over renting a home, and those advantages can help you save money.
For many homeowners, part of the monthly mortgage payment “comes back to you” in tax savings.

Homeownership is a Good Investment for Qualified Buyers

For the majority of Americans, their home is their largest
financial asset and a major player in their investment portfolio.
The NATIONAL ASSOCIATION OF REALTORS® estimates that home value rises, on average, by 4.5 percent a year. That’s a steady return on investment; one’s own home is a much less volatile asset than stocks, bonds or mutual funds, even when the recent downturn is considered.

How do you build up your net worth?

As a homeowner, you build wealth in two ways:
1. through paying down the principle on your mortgage
2. through those “appreciating returns” on your home

“Appreciating” Returns

As an example, let’s look again at that $200,000 home.
Unlike your rental unit, your home should appreciate over time.
Instead of assuming average growth, we assume that prices
are flat in the first year of ownership and pick up, but only
slightly, in the second year. In the third year of ownership, your
home has appreciated to a modest $210,858. After ten years,
assuming a return to an average 4.5 percent appreciation rate*,
your $200,000 home will be worth $286,948. Not only do you
earn a rate of return on your original purchase price, you also
get a return on any subsequent appreciation.
* Average price appreciation from 1970 to 2008 was 6.0%

Buyers Come Out Ahead

You may be surprised to see that the homeowner still comes out ahead of the renter even if there is a decline in the home's value over the next year.
Extraordinarily low interest rates and lower prices have ushered in some of the best affordability conditions in a generation in 2009.

Homeownership Builds Wealth for Households

The Federal Reserve Board estimates that homeowners’ net worth has ranged between 31 and 46 times more than that of renters in the years 1998 to 2007.
In 2007, the median net worth for homeowners was $234,200 compared to $5,100 for renters.
Even though that difference will surely narrow as a result of house price declines since 2007, median homeowners will likely still have substantially greater net worth than median renters."

As home price growth returns to a normal level the amount of wealth that you net from appreciation will increase. At the same time you pay your mortgage reducing your outstanding debt.

As your debt decreases through the years and the home value increases, you accumulate
wealth from the value of your home. In addition, over this ten year
period, you will have a significantly lower after-tax payment
for housing. Each year as your home appreciates and you
continue to pay down your mortgage debt, you increase your
own net worth.

Stimulus package

Given recent changes in home prices and the current low mortgage rate climate, there have been significant gains in affordability for prospective first-time homeowners.
In 2009, a provision in the Stimulus Bill provided for a first-time Homebuyer Tax Credit of 10% percent of the purchase price of the home up to $8,000.

Requirements:
1. property should be pricipal residence.
2. the buyer must not have owned property during 3-year period before date of purchase.
3. the property must be the buyer's principal residence for 36 month after the purchase, othervise, the credit must be re-paid back.
4. some income restriction exists. Tax credit begins to phase out if modified adjusted income is over $75,000 (or $150,000 for joint filers) no tax credit at all if modified adjusted gross income is over $95,000 ( or $170,000 for joint filers)
5. Date of Purchase should be before November 30, 2009

Call to Tatyana Baytler if you have any questions about the stimulus package or any other questions.

Appraiser Checklist

Here is some details about appraisal process for you ...

Incentives and concessions. Most of today’s buyers expect to pay the lowest possible price and still get some extras. Sellers and home builders are offering money toward closing costs, remodeling and decorating, upgrades, and association dues. The price set initially may not be the final price once concessions are factored out. Appraisers care about that final number.


Closing date. Forget what comparable neighborhood houses sold for a few months back. Appraisers want prices from the most recently closed transactions. “If a sale was more than 45 days ago, even 35, the price may be irrelevant,” Hillas says.


Condition and curb appeal. Appraisers typically find several properties with similar interior and exterior features to determine value. When markets are healthy, blemishes matter less, but when markets soften, problems—a dated kitchen or barren lawn—can reduce prices and deter buyers. “The difference in value is not just the repair costs but the time and hassle to make them. It’s better for sellers to do work in advance,” Hillas says.


Foreclosures. Appraisers technically shouldn’t consider neighborhood foreclosures when valuing a home, since foreclosures don’t meet the Appraisal Institute’s definition of a property reasonably exposed in a competitive market, says Herndon. “But when several neighborhood homes are abandoned, it’s hard not to caution sellers that this is a troubling trend and may affect home values,” she says.


Changing demographics. If a house is in an up-and-coming area, the value can be expected to rise. A location that’s perceived as safe also may help attract the increasing number of single female buyers.


Economic clouds. If there’s an oversupply of comparable homes for sale, or if the local job market is suffering, buyers may be hesitant to invest. Hillas advises setting prices aggressively from the get-go.


Chemistry. It’s hard to account for those times when buyers fall in love with a house, despite a high price, poor condition, or tough economy. “Emotional attachment is a factor that can’t be predicted,” says Herndon. Hillas agrees, “It’s what makes it harder to appraise homes versus commercial buildings, where buyers care more about the bottom line.”

Source

Statistics August 2009

Columbia
Real Estate Statistics

Homes for sale in Columbia

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US tax $8000 credit may help you buy house in 2009

You might be able to use the $8,000 first-time homebuyer credit to buy your house, instead of having to purchase the house first and then claim the credit on your tax return.

The U.S. Department of Housing and Urban Development says that the tax credit can be applied to cover purchase costs, including in certain cases the down payment, if you are taking out a mortgage insured by the Federal Housing Administration. This doesn't apply to other types of mortgages.

"It is a very attractive offering, and basically it addresses one of the hurdles that keeps more people from buying a home - getting help with the down payment or paying closing costs," says Bob Meighan, a vice president with TurboTax.

The first-time homebuyer tax credit, part of February's economic stimulus package, is worth up to 10 percent of the price of the home, but not more than $8,000. To qualify, you can't have owned a home in the previous three years, and you must buy the house this year between Jan. 1 and Nov. 30. The credit can be claimed next year when you file your taxes, or you can file an amended 2008 return to get it this year.

But according to recent guidance issued by HUD, you will be able to get the use of the money even earlier if you take out an FHA-backed loan with the help of a state Housing Finance Agency or from one of the FHA-approved nonprofits and private lenders.

There are no income limits to qualify for an FHA mortgage, although there are caps on the size of the mortgage. Limits differ from county to county. In Maryland, loan limits for a single-family home range from $271,050 in Allegany County to $729,750 in Montgomery, Frederick and Prince George's counties. In Baltimore City and Baltimore and Howard counties, the cap is $560,000.

There are two ways to tap the tax credit early:

You can get an advance on your credit from an FHA-approved lender or nonprofit. You will likely have to repay the money shortly after getting your tax refund, says Meg Burns, FHA's director of single-family program development.

Lenders also can charge a nominal fee - 2.5 percent of the credit or less - to make the advance.

The advance can't be used for the 3.5 percent down payment required under FHA-insured loans. But it can be applied to other purchase costs or to make a bigger down payment, thereby reducing your monthly mortgage payments.

For a list of FHA-approved lenders, visit www.hud.gov or call 800-CALL-FHA (800-225-5342).

The second way to tap the credit is through your state's housing finance agency, which helps low- to moderate-income homebuyers. Under this way, the agency lends you the amount of the credit. The loan terms, including any interest and the amount of time to repay, will vary from agency to agency, Burns says. The loan also can be used for the required 3.5 percent down payment or other closing costs.

Not every state housing agency or FHA-approved lender will participating in this tax credit program, so call in advance to find out.

For instance, Maryland's agency, the Maryland Department of Housing and Community Development, currently doesn't have a loan tied to the tax credit, but offers closing cost assistance worth up to $5,000 for first-time homebuyers who meet certain income limits.

Do you have questions about it? Call Tatyana Baytler: 443-527-4375

Housing sales in the United States may rise to a 2-year-maximum - forecast ....

Experts of the Freddie Mac mortgage agency claim that sales of primary and secondary housing in the United States can climb to an annual level of 5.1 million units in Q3 2009. This would become the largest quarterly increase in sales over the past two years.

In comparison to the indicators of the preceding quarter, which have amounted to 4.61 million properties, sales could increase by 11%, Bloomberg reports. This trend is reasoned by low housing prices and governmental measures aimed on supporting property buyers.

Besides that, housing sales contribute to the growth of consumer spending, which accounts for 70% of U.S. GDP. New homeowners are most likely to purchase household appliances, furniture and household utensils.

According to Freddie Mac’s chief economist, Frank Nothaft, the recent series of positive news - regarding the increase in sales volumes of primary and secondary housing and the quarterly increase in prices - suggests that the U.S. housing market has started to stabilize.