The Senate voted on Wednesday of last week to extend the $8000 tax credit for first time home-buyers through the first 6 months of next year as part of a broader bill to extend unemployment benefits. For the first time, the tax credit program will also extend to homeowners who currently own a home and wish to purchase a new primary residence. On Thursday, the bill reached the House and easily passed there as well, paving the way for President Obama to sign it into law. On Friday, President Obama signed the bill making it official.

Some key points of this bill are:

1.] For first-time homebuyers: They have until May 1st of 2010 to go into contract and they must close escrow by June 30th of 2010. The new law raises the annual income for a single person to $125,000. For married couples it is no $225,000.

2.] For current home owners: Current homeowners are eligible for a tax credit of up to $6500 when they purchase their next primary residence.  Current homeowners must have lived in their residence for at least 5 consecutive years over the last 8 years.  Current homebuyers must have a signed purchase agreement in place as first-time buyers…May 1and June 30 respectively.

3.] Additional details: There is a cap on the house price…$800,000 and they must occupy the home as their primary residence for at least 3 years to avoid paying back the tax credit. Buyers are allowed to claim the credit back on their 2009 taxes, even if the purchase was made in 2010, by filing an amended return. Military personnel, deployed overseas for a minimum of 90 days in 2008/2009, will have until April 30th, 2001 to claim the tax credit. The bill is estimated to have a cost of at least $10 billion.

This is a welcome relief for the housing market. Although housing sales have risen significantly due to the tax credit already in place, it has become increasingly challenging for buyers to get purchases closed when in a short sale scenario, as the banks are so overloaded that they cannot respond in an appropriate length of time, therefore many buyers backed out of their short sale purchases under the concerns of missing out on the $8000 tax credit.   This tax credit extension will provide a stop-gap to help aid the housing recovery, but we still have numerous issues to resolve before we can say that our economy has stabilized.  For more information on the tax credit, go to www.federalhousingtaxcredit.com.  Last week, it was reported that the jobless rate has gone north of 10% for the first time since 1983…and is likely to go higher. In addition, many economists worry that the continued high unemployment rate could undermine the recovery by restraining consumer spending, which accounts for about 70% of the economy. Even this figure is skewed…if you take into consideration those who have settled for par-time jobs or stopped looking for work, the unemployment rate should be at least 17.5%!

We are facing challenging times. We have many obstacles in front of our path. We must empower ourselves to find creative ways to deal with those challenges. We must reinvent ourselves…create new jobs, created the drive to “push through”.   Create the belief in ourselves and stop relying on the government…that type of independence is empowering!

* Nouriel Roubini: “A sustained rebound in housing demand is vital for bringing down elevated levels of housing inventories and stabilizing prices. With housing affordability at an all-time high, buyers are responding positively to falling prices, historically low rates on mortgages and a US$8,000 tax credit for first-time home buyers.  Still, home sales and purchase mortgage applications remain depressed y/y. While the tax credit, which expires on December 1, 2009 will boost sales through the end of the year, a sustained uptick in demand for housing may be delayed as the worsening unemployment rate prolongs consumer retrenchment.”

* Lawrence Yun, Chief Economist, National Association of Realtors: “The housing market has decisively turned for the better. A combination of first-time buyers taking advantage of the housing stimulus tax credit and greatly improved affordability conditions are contributing to higher sales.” (August 21, 2009)

* Calculated Risk Blog: The first-time home buyer tax credit will boost home sales through November 2009. “This level of first-time buyers is completely unsustainable–even if another tax credit is enacted. There was significant pent-up demand from potential first-time buyers who were priced out of the market in 2004-2006, and then were afraid to buy as prices fell. But demand from these buyers will wane.” (August 14, 2009)

The expert opinions vary, but somewhere a reality check must appear.  I am bullish on the long-term economic future for Las Vegas.  That being said, we are far from being “out of the woods” so to speak.

We have seen a significant rise in real estate sales in 2009 causing many realtors to proclaim that we have hit the bottom and are on the way up.  It is always interesting to me how they make these broad statements based on a few months of increased sales.  To me, this is the “living paycheck to paycheck” philosophy.  This uptake in the housing market has been driven by Foreclosures and Short Sales…hardly a positive sign when people are losing their homes.

The wealthy are having a difficult time selling their homes.  In March alone there were over 1100 homes for sale over $1,000,000.00 and less than 10 sold during that month.  Wealthy individuals drive economies as they have money to spend and create jobs by owning businesses.  Currently unemployment in Las Vegas is north of 13%.  Many believe it could go as high as 17%.  Until the unemployment numbers start to fall, we are still in a precarious position.  A big boost will be if the federal government extends the first time buyers tax credit of $8000, that is due to expire the first of December 2009.

As people in the market place, we have to “re-invent” ourselves.  Real estate agents need a reality check and get outside the bubble.  One agent, who I had highly respected up to that point, told me that our economy was on the way up because housing sales were up.  I pointed out to this agent that was only the case in homes below $200k, an distinct indication that they were REO and Short Sales.  this is the “paycheck to paycheck” mentality.  This is not something that is sustainable.  Unemployment must stabilize and begin to decrease for prices to climb.  The mid-level and high-end markets must show signs of recovery.  This could easily take 2-3 years as there are more ARM re-sets to happen in 2010 and 2012.  We must be creative in our approach.  Look for other ways to stimulate the markets.

One positive note is that the buildable lots in the Las Vegas area are being scooped up rapidly by investors and builders.  Prices in that market are rising.  Raw land prices seem to have stabilized as well.

Ask yourself this…Are you ready to re-invent yourself in the housing market?  Are you ready to take that Empowering step?

We are in the midst of the worst mortgage and real estate crisis since the “Great Depression” of the 1930’s. Real estate values have dropped dramatically, and in some areas it has caused unemployment to rise to levels approaching 10%. This dramatic drop in value coupled with the slowing economy and the jobless rate rising, has made it impossible for many homeowners to stay in their homes. These challenges have forced homeowners to sell. When, due to market conditions, their house does not sell and they cannot afford the payments any longer, they must look at options such as Short Sale, Foreclosure, or Deed-In-Lieu Of Foreclosure.

Not all homes that are in default go completely to foreclosure. Many will sell prior to the notice of default being finalized. Short Sales and Foreclosures are attractive to home buyers and investors because they want to purchase a home that is below market value. Sometimes the seller who is in default and the buyer who is looking to purchase a distressed property can negotiate out a transaction that works for both. It is then a “Win-Win” for both parties.

Buying and selling distressed properties is a complicated and often daunting task. Even though sellers are upside down and not in a good negotiating position, they still have rights. You should always seek the advise of a qualified real estate agent, who is well versed in short sales and REO properties. Agents who are experts in these areas will help you avoid many of the pitfalls of Short Sales and Foreclosures. I also recommended that if you have any questions you do not feel are answered adequately by your RE agent, seek the advice of a qualified RE attorney.

As we further discuss this important topic we will review four points;

1.] The Basics of Buying and Selling Short Sales and Foreclosures
2.] How To Do a Short Sale
3.] Stopping the Foreclosure Process
4.] Foreclosure and Short Sales Taxes…Do You Have a Liability?

Watch for daily updates and discussions on this important topic.  There are alternatives.  There are solutions.  We have teams of real estate professionals who can assist you with the short sale or foreclosure transaction.