Real Estate
5 Reasons to Buy a Home Now
Conditions are nearly perfect to get a super bargain. But don't dally.
By Pat Mertz Esswein, Associate Editor, Kiplinger's Personal Finance
September 17, 2009
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If you've been waiting for home prices or interest rates to fall further before you buy a home, it's time to rethink your strategy. If you act soon, you'll be able to take advantage of historically low prices and interest rates that won't be around forever. And if you're a first-time buyer and you act very soon, you can still take advantage of an $8,000 tax credit. Here are five reasons to take the plunge now.
1. You may get a fat tax credit.
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The first-time home buyer's tax credit is worth 10% of the home's purchase price, up to a maximum of $8,000. But to lock in the credit, you must close on your purchase by November 30. Given that it usually takes a minimum of 30 to 45 days to get to closing after you and the seller have a ratified purchase contract, your real deadline is closer to October 1.
You don't qualify for the credit if you owned a primary residence in the past three years. And the credit begins to phase out when adjusted gross income is more than $75,000 for single filers, or $150,000 for married couples filing jointly (those with incomes of more than $95,000 and $170,000, respectively, will not receive a credit).
Although several bills before Congress propose to extend or even expand the credit, don't count on it. Legislators are preoccupied with health-care reform and concerned about increasing the federal deficit.
The desire to lock in the credit pushed Ari Weitz, 27, of Atlanta, to buy his first home in August. Weitz began shopping in Inman Park, a vibrant neighborhood in Atlanta's Old Fourth Ward. In April, Weitz found a 1,700-square-foot townhome with three bedrooms and three and a half baths that he really liked. It was listed for $275,000.
His first two offers of $240,000 and $250,000 with $5,000 in seller-paid closing costs didn't fly, but Weitz monitored the status of the property. When he learned in July that the owner was moving out of state and had to sell, he offered $254,000. That offer was accepted, and he got the $5,000 in closing costs, too.
2. Prices are scraping bottom.
It's hard to know whether prices are as low as they'll go, but the housing market is showing signs of life. Between the first and second quarter of 2009, the S&P/Case-Shiller Home Price Indices, a measure of U.S. home prices, rose by 3%. That's the first quarter-over-quarter increase in three years.
Robert Shiller, an economics professor at Yale and a developer of the S&P/Case-Shiller Home Price Indices, says it's too soon to call the uptick a turning point. He says that it may indicate only that the decline in home prices-some 30% since the housing market's peak in mid 2006-is slowing.
The National Association of Realtors (NAR) says homes haven't been this affordable since the 1970s. Based on average income and median home price, a little more than two-thirds of California households could afford to buy an entry-level home during the second quarter of this year, compared with just less than half a year ago.
Reader Comments (9)
Posted by: LA Finance at 09/19/2009 01:00:47 AM
All RE is local, as are rent/purchase and income/price ratios. This being said, here in many neighborhoods in LA, we are a few years from bottom. That is, unless Congress is determined to re-inflate the RE bubble. In spite of fundamentals, job growth, and a growing economy.It appears as such. The same NAR that this article references, is a 1.1 million member group that is lobbying Congress hard to extend the credit next year to the tune of 15K instead of 8K. Don't believe me? Read the NYTimes article from 9/15. (Unfortunately Kiplinger doesn't allow to post links) What sickens me is that these 8K tax credits are costing taxpayers much more. Estimates have put the tab at 40K. When will be put our foot down and stop padding the pockets of lobbyists, realtors, bankers, and the like while saddling ourselves (and future generations) will debt upon debt.
Posted by: James Finnigan at 09/19/2009 02:20:39 AM
Buying a house right now is dumb idea. Renting s the way to go, if you lose your job you can get out of a lease. Can't get out of a mortgage without ruining your credit......
Posted by: axure at 09/19/2009 02:38:42 PM
What about the 6 million more foreclosures coming over the next 2-3 years? These will force prices down another 25% to 40% as well as bring another wave of foreclosures of anyone that bought since 2007. The downward spiral will only stop when real unemployment drops below 8% vs the 19% it is at now. The press and the government are grossly underestimating the greed of the banks that ironically were bailed out of their troubles by taxpaying homeowners now being foreclosed.
Posted by: Robin at 09/21/2009 06:45:50 PM
Re: James Finnigan's comment about getting out of a lease vs. not being able to get out of a mortgage. It is possible to get out of a mortgage by selling the house. If it doesn't sell, one can always rent it to someone who "just wants to rent"-like you. Thanks for making MY mortgage payment! The only value in renting is if you were going to move soon after you moved in, like within 6 months to 2 years.
Posted by: Lloyd at 09/23/2009 10:24:05 AM
I like how the NAR is used as a source for how great things are. Go to Patrick.net
Posted by: Can\'t afford a hous at 09/23/2009 12:29:54 PM
I rent because my job doesn't pay me enough to save money for the down payment and all of the other monetary things that go along with buying a home....If something breaks I cannot not afford to get it fixed
Posted by: Kevin at 09/23/2009 12:35:31 PM
Prices haven't gone down in Washington DC by too much. A simple one bedroom in a crappy neighborhood is around $275K. Barely affordable for someone like me, making 80K.
Posted by: C. I. Mallin at 09/24/2009 06:30:11 AM
Good advice for NEW home buyers, but Congress should provide an Amendment to the 2008 First Time Home Buyers Program...2008 buyers entered in Good Faith and now feel cheated. Tax benefit for 2008 home buyer = =$7500.which must be PAID BACK ! ..Tax benefit for 2009 home buyer = = $8000. which is NOT REQUIRED to be paid back ! So, if you sealed the transaction in December of 2008 and then looked at another transaction ONE week later, you'd feel that someone, somewhere, let you down. It's totally wrong! AN AMENDMENT TO THE 2008 FIRST TIME HOME BUYER PROGRAM IS REQUIRED. I can get a better deal from a Discount Store if I find that the item I purchased at regular price goes on sale one or two weeks later. Our government should do the same for those who entered the program in 2008 in Good Faith. They need a 2008 tax amendment to match the 2009 tax benefit !! Call your Congressman !
Posted by: Live up 2 your deal! at 09/24/2009 03:51:55 PM
You got a...tax benefit loan that you have to pay back, which apparently you thought was a great deal at the time. Now someone is getting a better deal and you are not happy. What a sense of entitlement you have! The government is not Walmart or Best Buy! The idea of tax incentives is to encourage people to buy and therefore boost the economy...