NEW YORK (CNNMoney.com) - January 14, 2010
Did you purchase a home after Nov. 6? Don't expect your $8,000 homebuyer tax credit any time soon.
Since Congress passed the tax credit last February as part of the stimulus program, more than 1.4 million buyers have scrambled to take advantage of it, according to the IRS.
All they had to do was file an amendment to their 2008 tax returns (the ones they filed last spring) and claim the promised refund of 10% of the purchase price -- up to $8,000.
"I closed on a Friday and I filed an amendment to my taxes on Monday," said Valatisha Jacinto, who purchased her Waco, Texas, home last March.
But that all changed on Nov. 6.
One CNNMoney.com reader wrote: "I bought a new home to get the $8,000 tax credit like many others. However the IRS has NOT ALLOWED ANYONE TO FILE since November 6th!! It has been over 2 MONTHS!!"
He's right. Nov. 6 marked the date that the rules changed because an extended -- and expanded -- version of the homebuyer tax credit went into effect. And that put filing for the credit on hold.
What I did with my $8,000 tax credit
Originally, the credit was just good for first-time buyers and was slated to end on Nov. 30. But Congress extended the credit to include contracts signed by April 30 and closed by June 30. It also made a refund of up to $6,500 available to existing homeowners looking to buy something new.
And that marked the start of a new IRS paperwork wrangle.
Those homeowners who closed their sale before Nov. 6 use Form 5405 to claim the credit right away. But those closing after that date are in limbo because no form yet exists for them to file.
The IRS had been expected to come out with a revised form by early January, but it has yet to release anything.
Robert Dietz, an economist with the National Association of Home Builders who has been monitoring the situation, said the delay may be caused because numerous parties, including the Treasury Department, have to agree on how to process all the new documentation that the expanded tax credit requires. Whereas before, all you did was file a form saying you'd bought a house -- no proof required.
Now, for example, existing homeowners buying new places must provide proof that they owned and resided in their previous homes for at least five of the past eight years.
"They may just be making sure all their i's are dotted and their t's are crossed before they release it," Dietz said.
No e-filing for homebuyers
Even after the new form is ready, new filers will still face delays. Anyone who wants to claim their first-time homebuyer tax on their 2009 taxes (the ones being filed now through April 15) can't do it it electronically. That's right: Back to paper filing.
Part of that change is because the IRS has become more concerned about fraud as it discovers more people claimed the tax credit without actually purchasing property.
In October, a tax preparer, James Otto Price III, was the first person convicted of this crime. He falsely claimed the credit for 15 clients.
"Because of the scams, the IRS started sending back the amended returns and asking for proof," said Mary Mellem of David & Mary Mellem, EAs & Ashwaubenon Tax Professionals.
The IRS, she said, now requires a signed copy of the settlement statement ( HUD-1), plus a signed mortgage statement with the new address and a copy of either the taxpayer's drivers license, bank statement or pay stub, showing the new address. That paperwork slows the process.
"The system has no way of sending along the documents they're requiring," said Mellem. "Taxpayers must file a paper return instead."
The IRS points out that taxpayers can still use the electronic forms available on its Web site; they just have to print them out, attach the proof and mail everything in. And that can take quite a while.
"Taxpayers are looking at another three months before they get their returns," said Mellem.
Housing picture not all gloomy
San Diego UNION-TRIBUNE - January 3, 2010
Median price 48.4% higher than in January 2000
For all the talk of the housing bust, San Diego County’s median price ended the decade up 48.4 percent from 2000.
If in January 2000 you bought a home at the median price of $219,000 and went to sleep like Rip Van Winkle, you awoke at the end of 2009 to see your home worth $325,000.
This means that many longtime homeowners are still sitting on big gains even after seeing the market skyrocket to a peak of $517,500 in November 2005 before plummeting.
Take the Krumweide family in University City. The family bought a 2,800-square-foot home for $432,000 in June 2000, took out a small amount of equity for home repairs when they refinanced and now could sell the house for about $850,000, according to their neighbor and original real estate agent, Ann Throckmorton.
“We’re just relieved we stayed with our guns, stayed with our heads,” Molly Krumweide said.
Thousands of San Diegans aren’t so fortunate. Either they bought in the midst of the bubble and paid far more than what their homes would command today or they piled on debt by refinancing their homes to pay for cars, vacations or everyday expenses.
When the housing bubble burst at the end of 2005, dreams became nightmares, and the bad vibes are likely to ripple through the economy for years.
Throckmorton likened the market to a game of musical chairs: “Not only did more than one person not get a chair, there was a lot of falling over each other. There was much damage.”
During the decade, about 510,000 homes changed hands, but 41,100 were lost to foreclosure through November. Nearly 121,000 notices of default were lodged against local residents. Thousands more are delinquent in their payments and hoping their lenders will modify the loans or let them do a “short sale” — sell for less than the outstanding mortgage balance.
“The greatest recession since the Depression and the financial market meltdown in the last year has changed people’s behaviors, and changed lenders’ willingness to extend credit to a lot of people,” said Andrew LePage, an analyst for San Diego-based MDA DataQuick. “It will take years to recover that (lost) equity, and they won’t have much equity.”
But according to MDA DataQuick’s findings, things are not as bleak as they seem.
Home prices in all but a handful of neighborhoods have bounced back from their lows since 2006. Three are less than 20 percent from their peaks — Scripps Ranch, Rancho Peñasquitos and eastern Rancho Bernardo.
During the decade, Jamul was the only neighborhood with a monthly average of at least 10 single-family resales not to see higher prices.
What’s in store for the new decade — more boom and bust or a steady increase in values as supply and demand get back in balance?
Economists and market analysts who watched the decade’s gyrations can imagine both a worst-case scenario or a best-case outlook, but they stress the need to return to market fundamentals.
“Over the long haul, house prices can’t grow faster than people’s income,” said James Hamilton, an economics professor at the University of California San Diego. “Many people ignored that lesson over the last decade and paid a pretty high cost.”
Some economists say prices could dip in 2010 as foreclosures and defaults multiply. But over the long run, many expect appreciation of a few percentage points over inflation — roughly 6 percent annually. San Diego’s year-over-year price change in November was 6.6 percent.
If that rate persists, the peaks reached several years ago will be seen again by 2018, said Robert Kleinhenz, a former Cal State Fullerton economics professor and now an economist at the California Association of Realtors. That date seemed reasonable to analysts not tied to the real estate industry.
“Whether we hit that mark or not, I’m not making a forecast,” Kleinhenz said.
One reason prices could bounce back is that home building did not suffer the excesses of the 1980s and entered the recession with a relatively small number of completed but unsold properties. Also, building has virtually come to a stop since then.
The 2009 building-permit count, estimated at 2,900 housing units, was the lowest since World War II — which explains the big layoffs in the construction sector. Only 4,000 permits are expected next year, said University of San Diego economist Alan Gin.
“At some point in the next two or three years, we’re going to be stuck once again with a lot more demand for available housing than we’re able to build,” said Kelly Cunningham, an economist at National University’s Center for Policy Research.
Together with San Diego’s historic slowness in approving new housing, “that will only drive up prices again,” Cunningham said. “It can quickly turn again. I’m not sure when — probably in a few years, once we work through all the foreclosed homes and existing homes (for sale).”
One of the high points of the decade was a rise in homeownership rates, up to 58 percent in San Diego and nearly 70 percent nationally. Granted, many buyers have lost their homes — but not all — and owners-turned-renters will be able to buy again once they rebuild their credit scores and bank accounts.
“The other thing we can assume is as the market improves, lenders will not go quite to the loose lending practices of the last cycle but definitely will swing the pendulum back to the middle,” said Jeff Meyers, who runs a local real estate consulting firm specializing in the new-home market.
Christopher Thornberg, a former UCLA Anderson Forecast economist and co-founder of Beacon Economics in Los Angeles, rang early warning bells about a pending real estate bust — calls that he said were usually met with laughter at his speaking engagements. Thornberg said he believes San Diego is well-positioned with a diversified economy to recover from the recession and the real estate debacle.
“In the long run, I’m optimistic,” Thornberg said. “I worry about the next couple of years. … We have not escaped the consequences of our actions quite yet. I wouldn’t call the new decade a clean slate by any stretch of the imagination.”
Median price 48.4% higher than in January 2000
For all the talk of the housing bust, San Diego County’s median price ended the decade up 48.4 percent from 2000.
If in January 2000 you bought a home at the median price of $219,000 and went to sleep like Rip Van Winkle, you awoke at the end of 2009 to see your home worth $325,000.
This means that many longtime homeowners are still sitting on big gains even after seeing the market skyrocket to a peak of $517,500 in November 2005 before plummeting.
Take the Krumweide family in University City. The family bought a 2,800-square-foot home for $432,000 in June 2000, took out a small amount of equity for home repairs when they refinanced and now could sell the house for about $850,000, according to their neighbor and original real estate agent, Ann Throckmorton.
“We’re just relieved we stayed with our guns, stayed with our heads,” Molly Krumweide said.
Thousands of San Diegans aren’t so fortunate. Either they bought in the midst of the bubble and paid far more than what their homes would command today or they piled on debt by refinancing their homes to pay for cars, vacations or everyday expenses.
When the housing bubble burst at the end of 2005, dreams became nightmares, and the bad vibes are likely to ripple through the economy for years.
Throckmorton likened the market to a game of musical chairs: “Not only did more than one person not get a chair, there was a lot of falling over each other. There was much damage.”
During the decade, about 510,000 homes changed hands, but 41,100 were lost to foreclosure through November. Nearly 121,000 notices of default were lodged against local residents. Thousands more are delinquent in their payments and hoping their lenders will modify the loans or let them do a “short sale” — sell for less than the outstanding mortgage balance.
“The greatest recession since the Depression and the financial market meltdown in the last year has changed people’s behaviors, and changed lenders’ willingness to extend credit to a lot of people,” said Andrew LePage, an analyst for San Diego-based MDA DataQuick. “It will take years to recover that (lost) equity, and they won’t have much equity.”
But according to MDA DataQuick’s findings, things are not as bleak as they seem.
Home prices in all but a handful of neighborhoods have bounced back from their lows since 2006. Three are less than 20 percent from their peaks — Scripps Ranch, Rancho Peñasquitos and eastern Rancho Bernardo.
During the decade, Jamul was the only neighborhood with a monthly average of at least 10 single-family resales not to see higher prices.
What’s in store for the new decade — more boom and bust or a steady increase in values as supply and demand get back in balance?
Economists and market analysts who watched the decade’s gyrations can imagine both a worst-case scenario or a best-case outlook, but they stress the need to return to market fundamentals.
“Over the long haul, house prices can’t grow faster than people’s income,” said James Hamilton, an economics professor at the University of California San Diego. “Many people ignored that lesson over the last decade and paid a pretty high cost.”
Some economists say prices could dip in 2010 as foreclosures and defaults multiply. But over the long run, many expect appreciation of a few percentage points over inflation — roughly 6 percent annually. San Diego’s year-over-year price change in November was 6.6 percent.
If that rate persists, the peaks reached several years ago will be seen again by 2018, said Robert Kleinhenz, a former Cal State Fullerton economics professor and now an economist at the California Association of Realtors. That date seemed reasonable to analysts not tied to the real estate industry.
“Whether we hit that mark or not, I’m not making a forecast,” Kleinhenz said.
One reason prices could bounce back is that home building did not suffer the excesses of the 1980s and entered the recession with a relatively small number of completed but unsold properties. Also, building has virtually come to a stop since then.
The 2009 building-permit count, estimated at 2,900 housing units, was the lowest since World War II — which explains the big layoffs in the construction sector. Only 4,000 permits are expected next year, said University of San Diego economist Alan Gin.
“At some point in the next two or three years, we’re going to be stuck once again with a lot more demand for available housing than we’re able to build,” said Kelly Cunningham, an economist at National University’s Center for Policy Research.
Together with San Diego’s historic slowness in approving new housing, “that will only drive up prices again,” Cunningham said. “It can quickly turn again. I’m not sure when — probably in a few years, once we work through all the foreclosed homes and existing homes (for sale).”
One of the high points of the decade was a rise in homeownership rates, up to 58 percent in San Diego and nearly 70 percent nationally. Granted, many buyers have lost their homes — but not all — and owners-turned-renters will be able to buy again once they rebuild their credit scores and bank accounts.
“The other thing we can assume is as the market improves, lenders will not go quite to the loose lending practices of the last cycle but definitely will swing the pendulum back to the middle,” said Jeff Meyers, who runs a local real estate consulting firm specializing in the new-home market.
Christopher Thornberg, a former UCLA Anderson Forecast economist and co-founder of Beacon Economics in Los Angeles, rang early warning bells about a pending real estate bust — calls that he said were usually met with laughter at his speaking engagements. Thornberg said he believes San Diego is well-positioned with a diversified economy to recover from the recession and the real estate debacle.
“In the long run, I’m optimistic,” Thornberg said. “I worry about the next couple of years. … We have not escaped the consequences of our actions quite yet. I wouldn’t call the new decade a clean slate by any stretch of the imagination.”
Market update & advice from our brokerage
Happy 2010 to everyone! 2009 was a year unlike many others. I project 2010 to be just as exciting.
On the real estate front in San Diego sales improved over 2008 due to low interest rates and prices as well as the homebuyer tax credit. Keep in mind that in order to take advantage of the tax credit this year a home purchase must be under contract by April 30, 2010 and closed by June 30, 2010. 11,730 attached homes changed hands during the year compared to 10,006 in 2008, an improvement of about 17%. 22,156 detached homes transacted in 2009 compared to 19,100 in 2008, an improvement of about 16%.
Prices in the lower levels have been increasing and it is my belief that the majority of the foreclosure activity has been completed for these homes. Prices in the middle and upper ranges continue to be softer but are improving, especially in the better areas. Jumbo loans are getting somewhat better and that will increase the move-up activity as they become even more attractive. It is felt by many that we could see larger numbers of short sales in higher price levels due to the number of option ARM loans resetting over the next few years.
Prices in the lower levels have been increasing and it is my belief that the majority of the foreclosure activity has been completed for these homes. Prices in the middle and upper ranges continue to be softer but are improving, especially in the better areas. Jumbo loans are getting somewhat better and that will increase the move-up activity as they become even more attractive. It is felt by many that we could see larger numbers of short sales in higher price levels due to the number of option ARM loans resetting over the next few years.
It is still my feeling that people who purchase over the next year or so will be very happy when they look back on things a few years later.
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