There are at least 3 problems with waiting until the end of April to enter into a purchase contract.  There will be more competition in April for the best homes available at that time.  Secondly, the percentage of accepted contracts that successful close has dropped.  Lastly if you are in a position that you must close on the property (under contract in June) or you will potentially lose $8,000, your contingency negotiating leverage is lost.

These issues don’t address the stress of working on a deadline and the sacrifices made in order to meet it.   Real estate transactions are complex and involve many aspects including mortgages, insurance, inspections, disclosures and more.  By properly preparing and working on your own timeline it can be so easy that the hardest part is actually moving your belongings.

If you want to take advantage of the available tax credits act now to avoid the many potential pitfalls of buying in April.  Inventory is currently abundant, mortgage rates are low, and you won’t be in competition with those that are waiting until April to get started.

Outline and comparison chart

Given the current mortgage and real estate environment transactions take longer to complete than they have in the past.  Bank owned and properties with positive equity are really the only options now as short sale properties typically take longer to negotiate and close.  While historically low mortgage rates, abundant inventory and low prices are attractive factors, the tax credit will soon be removed from the decision making process.

Lawmakers comment on extending and or expanding the Federal Tax Credit.  No formal action has been announced.

The House voted to extend the tax credit through 2010 for Military, Intelligence, and diplomatic personnel provided they were out of the country on active duty for at least 90 days in 2009.  H.R. 3590 now goes to the Senate and timing and process for its consideration are unknown.

Tax Credit qualifications
View qualifying property in metro St. Louis

The effect on the average first time home buyer is that if you submit an offer and it is accepted on August 10th could be up to 60 days before closing.  That would create a closing date of October 10th 2009.  A factor difficult to forecast is the potential delays from an anticipated increase in closings that will be taking place in the months of October and November in afforts to close transactions prior to the expiration of the program.

Now is the time to act.  During the next month or so we expect to see increased demand for properties that fit the profile for first time buyers in the market place.

Current property listings for the St. Louis metro area including photos are avalaible here.

Starting January 2009, Missouri Housing Development Commission (MHDC) will have a new product to enable first-time homebuyers to take advantage of the $7,500 federal first-time homebuyer tax credit. This program is the first of its kind in the nation.

The federal first-time homebuyer tax credit was created by Congress this summer to encourage new homebuyers to purchase homes and thereby stimulate housing markets. However, the federal tax credit has been largely ineffective. One of the primary reasons the federal credit hasn’t worked is that the homebuyer doesn’t receive the money until he receives his federal income tax refund – which may be several months after the home is purchased. 

With over 30 years experience funding mortgages for first-time homebuyers, MHDC knows that the biggest barrier faced by first-time homebuyers is acquiring money for downpayment and closing costs. As a result, MHDC created a program that allows homebuyers to receive the value of the tax credit at the time of closing.  

Get more information from a Participating Lender about the Tax Credit Advance Loan Program.

Misouri Housing Development Commission

Internal Revenue Service tax credit aid to first-time homebuyers

Pending home sales eased against a deteriorating economic backdrop but remain in a stable range, according to the National Association of Realtors®.

The Pending Home Sales Index,¹ a forward-looking indicator based on contracts signed in October, slipped 0.7 percent to 88.9 from an upwardly revised reading of 89.5 in September, and is 1.0 percent below October 2007 when it was 89.8.

Lawrence Yun, NAR chief economist, said a review of the past year is instructive. “Despite the turmoil in the economy, the overall level of pending home sales has been remarkably stable over the past year, holding in a generally narrow range,” he said. “We did see a spike in August when mortgage conditions temporarily improved, which underscores two things – there is a pent-up demand, and access to safe, affordable mortgages will bring more buyers into the market.”

Conditions remain uneven around the country, but some areas that are showing healthy gains in pending home sales from a year ago include many Florida and California markets, Providence, R.I.; Lansing, Mich.; Oklahoma City; and Las Vegas. ²

The PHSI in the South jumped 7.8 percent to 95.9 in October but remains 2.9 percent below a year ago. In the Northeast the index rose 0.6 percent to 68.1 but is 14.1 percent below October 2007. The index in the Midwest declined 4.3 percent to 79.7 in October and is 6.8 percent below a year ago. In the West, the index fell 8.7 percent to 103.7 but is 17.4 percent higher than October 2007.

NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said he’s hopeful about considerations by the U.S. Treasury. “Efforts to bring down mortgage interest rates demonstrate a clear understanding of the role housing plays in stabilizing the economy,” McMillan said. “We’re very encouraged by all of the proposals getting serious consideration in Washington to help home buyers. More sales will stabilize home prices by bringing down inventory, and would lessen foreclosure pressure.”

Yun expects growth in the U.S. gross domestic product (GDP) to contract through the first half of 2009, then stabilize and expand in latter part of the year – lifted by a home sales recovery. “Given the critical role of housing in an economic recovery, we’re confident sufficient stimulus will be offered to bring more buyers to the market,” he said.

Looking at middle-ground assumptions, existing-home sales are forecast to total 4.96 million this year, and then increase to 5.19 million in 2009 and 5.55 million in 2010.

New-home sales for 2008 should total 486,000 this year, decline to 393,000 in 2009 and then grow to 446,000 in 2010. Housing starts, including multifamily units, are projected at 934,000 units in 2008 and 731,000 next year before rising to 772,000 in 2010.

“Price projections are challenging in an environment with so many variables and divergent local conditions,” Yun said. “The home price correction to date has brought prices in line with fundamentals, but buyer pessimism could cause prices to overshoot downward, resulting in further economic deterioration.”

The 30-year fixed-rate mortgage will probably decline to 5.6 percent in the first quarter, rise slowly to 6.0 percent by the end of 2009, and average 6.2 percent in 2010. NAR’s housing affordability index is likely to remain quite favorable, averaging 138 in 2009.

The unemployment rate is estimated at 7.2 percent in the first quarter, rising to 8.3 percent by the end of 2009. Inflation, as measured by the Consumer Price Index, is seen at 0.7 percent in 2009. Inflation-adjusted disposable personal income is expected to grow 1.5 percent in 2009.

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¹The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity from 2001 through 2004 parallels the level of closed existing-home sales in the following two months. There is a closer relationship between annual index changes (from the same month a year earlier) and year-ago changes in sales performance than with month-to-month comparisons.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.

²Market information is from unpublished snapshot data; please contact your local association of Realtors® for more information.

Existing-home sales for November will be released December 23; the next Pending Home Sale

Reprinted with Permission of National Association of REALTORS®.