RISMEDIA, June 4, 2009-(MCT)-Generation Y is getting jazzed about a new $8,000 federal tax credit for first-time home buyers-jumping at the opportunity to move up and out of their rentals.
“The last 90 days I’ve seen it go crazy,” Kevin Foster, a real estate agent with Reece & Nichols in Lee’s Summit, said Tuesday. “Every conference room has been full with agents working on offers, and many are people in their 20s.”
Peter Abbey, 26, and his girlfriend, Abigail Barnett, 27, were among them.
Abbey, bar manager at Avenue Bistro in Kansas City, and Barnett, a hospital administrative assistant, had been saving to buy a house the past couple of years but weren’t quite there yet. Until Congress approved the expanded tax credit in February.
Now they’re leaving their rented home in the city for their own place in Roeland Park.
“We were saving money and waiting for the right time, and that definitely helped give us a push,” Abbey said. “We were able to buy a little bit earlier because of the government tax credit.”
The Kansas City Regional Association of Realtors said April sales of new and existing homes were up 10% from March, with almost 2,500 homes sold.
“We’re seeing a lot of first-time buyers back in the market again,” said Chris Collins of Keller-Williams and president of the association. “The tax credit along with historically low mortgage rates is affecting the market.”
The tax credit was part of President Barack Obama’s $787 billion American Recovery and Reinvestment Act. It’s available to people buying their first home in 2009 as long as the purchase is completed by Dec. 1.
Because of the one- to two-month lag between a contract and a done deal, many home buyers are making offers on homes now.
As opposed to a $7,500 tax credit available in 2008, the latest incentive doesn’t have to be repaid if the taxpayer remains in the home for at least three years.
At the national level, a report Tuesday said pending home sales in April were up 6.7% from March, the biggest monthly increase since October 2001, according to a seasonally adjusted index of sales contracts kept by the National Association of Realtors.
“We expect greater activity in the months ahead,” Lawrence Yun, the Realtors’ chief economist, said in a statement Tuesday.
Although economists are encouraged by signs that demand for housing is returning, the outlook is far from sunny. Mortgage rates are rising, making homes less affordable for many borrowers.
The average rate for a 30-year, fixed-rate mortgage is about 5.3% this week compared with about 5% last week, according to Bank-rate.com.
The health of the U.S. housing market, mired in a three-year slump, is one of the key issues facing the economy. Though sales may be recovering, analysts cautioned that prices will take longer to stabilize because of the glut of unsold properties. Prices are unlikely to rise until foreclosures start declining, and that’s unlikely to happen before the end next year.
The national median sales price in April plunged more than 15% from year-ago levels to $170,200, driven by sales of inexpensive foreclosures and other distressed low-end properties.
That was the second-largest yearly price drop on record, according to the national Realtors’ group.
But Jeff McCalmon of Suburban Financial/Tightwad Bank said the tax credit is getting the desired results.
“It’s jump-starting the market because it gets started with first-time buyers and then other people move up,” said McCalmon, who worked with Abbey and Barnett on obtaining their loan.
Shelley R. Denman, past president of the Mortgage Bankers Association of Greater Kansas City, said loan activity is on an upswing with about 50% coming from first-time buyers.
Her bank, Peoples Bank of Overland Park, has just completed the best three months since 2003.
“Ever since that (tax incentive) came out, we’ve seen a massive increase in first-time homebuyers,” she said.
Kalie George is using the tax credit to help her buy a 1930s bungalow in Kansas City, Kan. She’s getting a great price as well, $34,000, because the house was in foreclosure.
“I’m 22 and a first-time buyer,” she said. “It definitely made it more feasible to make things happen.”
Tax Credit Details:
– First-time home buyers can claim 10% of the home’s purchase price on their tax return-up to $8,000, or $4,000 if married filing jointly.
– The home must be purchased by Dec. 1.
– The credit doesn’t have to be repaid if the buyer lives in the home for 36 months after the purchase date.
– The Federal Housing Administration last week released details of a plan in which borrowers who use FHA loans can get advances from lenders that let them effectively receive the credit in advance, so they don’t have to wait to get the money from the Internal Revenue Service.
The Associated Press contributed to this report.
Copyright © 2009, The Kansas City Star, Mo.
Distributed by McClatchy-Tribune Information Services.
