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According to an article by the Associated Press, the federal government extended a tax credit for home buyers in November. The program was offering a tax credit of up to $8,000 for first-time home buyers and buyers who had not owned a home for three years. The government also added a new stipulation which would provide a tax credit of up to $6,500 for present home owners looking to "upgrade" or "downgrade" their homes with a larger or smaller residence.
The AP article said the tax credit for present home owners was intended to help stabilize prices and bolster the economy, however the national housing market is still unstable.
To qualify for the $6,500 tax credit, buyers must have owned and lived in the same home for five consecutive years out of the past eight. Contracts for new home purchases must be signed by April 30 and closed before June 30. The home's purchase price can not exceed $800,000 and it must be used as a main residence. Income limits for a single tax payer is $125,000 and $225,000 for a married couple.
While the federal government has the option to extend both tax credits, there has been no indication yet of whether an extension will be granted or not.
While the tax credit has seen mixed results on the national level, home buyers have been taking advantage of the credits on the local level.
"There are several different ramifications with the tax credit," Dan Montana, branch manager for Northwest Savings Bank, said. "We advise our customers to find out from their tax accountants whether they are eligible (for the credit) and for what amount." Montana said home buyers could be eligible for up to 10 percent of the loan amount.
He said while there hasn't been a lot of activity with the real estate market in certain areas, other areas have been picking up. He said the recent snow storms have been a factor in why more people haven't taken advantage of the credits sooner but the housing market tends to pick up in the spring.
"People are being cautious but there is money available if you qualify," Montana said. "Hopefully people will take advantage while the credits are available."
Ann Cristini, broker of record for Network Reality, said while the tax credits are a good motivator, it's not generating a lot of new buyers.
"Most of the people we're getting who are using the credits are people who were looking to buy a home anyway," she said.
Cristini said the housing market in Brockway has been holding steady over the past few years. She said while it's slightly more difficult to get a loan because banks are being more cautious about lending, her business has not had as many problems as others have.
"Our area has been very fortunate," she said, "Usually there's a shortage of homes for sale in Brockway. We've been holding steady and we're no where near as bad as some of the other areas."
Erica Hayden, realtor for Hoffer Realty, agrees that the credits are not bringing in a lot of people who hadn't already planned to buy.
"People are definitely taking advantage of it, but it's not going to make someone who had no plans to buy a home change their minds," she said. "With the economy the way it is, people are looking for any breaks they can find."
Hayden said with the holiday season over, an improvement in the weather and income tax returns coming back, more potential buyers are looking.
"If you're sitting the fence, now's the time to buy," she said. "It really is a buyer's market and there's not a lot of time left to qualify for the tax credit."
Joanne Dugean, senior vice-president for mortgage production manager with S&T Bank, and Karen Johnson, underwriter for special programs with S&T Bank, said they are seeing an increase in first-time home buyers, but not as much from "move-up" buyers, or people looking to purchase a larger home than what they presently have.
Dugean said in addition to the tax credit, S&T Bank also participates in an interest-free loan offer through the Pennsylvania Housing Finance Agency. She said home buyers can get an advance on their tax credit in the form of an interest free loan. She said the loan can be in the form of cash which can be used for closing fees and as a down payment. Home buyers are expected to pay the loan back when they receive their tax credit the following year. If they do not, then the money can be paid back at the same interest rate as the home loan for 10 years.
"People know about the tax credit, but they're not aware of some of the nuances involved," Dugean said. "There's still some fear of trying to sell in this market but purchases are up." She said in previous years, S & T Bank has seen a lot of refinancing on existing loans, but the trend for 2010 seems to be an increase in first-time home buyers.
Joe Varacallo, broker/owner for Coldwell Banker/Developac, said a home buyer does not have to buy a bigger home to receive the tax credits. He said he is seeing a lot of "empty nesters" and retired residents who are selling their larger home and purchasing a smaller one. He said the response of first-time buyers has been "phenomenal"
"We've been encouraging people to call their tax agents if they're not sure whether they qualify," Varacallo said. "It's (the credits) doing what it was supposed to do and we are seeing more activity." He said spring is typically the "buying" season but the time deadline is fast approaching.
Patty Iorfida, manager of Welcome Home Centers near Brockway, said her company has seen a lot of activity in buyers who are using the tax credits.
"It's been about 50-50 for both first-time home buyers and previous home buyers," she said. "It (the tax credits) has helped but it won't be permanent."
Iorfida said the housing market is slightly down from previous years but it's been holding steady. She said there is only one form to fill out for the home buyers and they must have a copy of their home contract, as well as either a HUD one settlement statement or a certificate of occupancy. She said most of the local tax accountants are familiar with the tax credits and have been very successful in assisting home buyers through the process.
Tax credits are also available for those who are looking to build a new home or remodel their existing residence.
Rick Bernardo of Torrell and Bernardo said while the construction of new housing has decreased, those looking to upgrade or remodel their present home can receive up to 30 percent of their construction costs back. He has seen a lot of projects where buyers will purchase a home and take advantage of the credits while also performing work such as installing new windows and insulated doors, new roofing and siding as well as upgrades to heating systems and the installation of geo-thermal systems.
"A lot of home owners are saying they can't afford that new house they want, so let's fix up this one. They hang on to their home for a year or two, then sell it at a better price," Bernardo said.
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Reported by Kimberly Finnigan, Tri-County Sunday. E-mail: kfinnigan@thecourierexpress.com
