Homebuyer’s federal tax credit set to expire

If it weren’t for an $8,000 tax credit, Roger Hoskins says, he never would have been in the market to buy a house.

He will move in a few weeks from an apartment in Henrico County to a $124,000 town house in Rappahannock — and pay about the same for a mortgage as he does for monthly rent.

He had been negotiating for a house teetering on foreclosure, but instead bought one that wasn’t a distressed sale. “I was running out of time.“

The deadline is approaching to take advantage of a federal first-time homebuyers’ credit, which expires Nov. 30 — unless Congress votes to extend it.

Buyers must close their transac-tions by that date — and not just have a contract on a house — to take advantage of the credit. It typically takes 30 to 45 days to close on a house once a contract is signed.

Banks expect a last-minute rush in the next 30 days as people seek to close on transactions by the deadline.
Somewhat of a misnomer, the credit is not just for first-time homebuyers but for people who have been out of the housing market for three years.

Hoskins, 62, a retired state employee, sold his last house in 2002.

He said he was looking to buy in the $150,000 range a few years ago but was priced out of the Richmond market.
Richmond still is too expensive — hence the move to Rappahannock, he said.

The $8,000 tax credit was too good to pass up. “That was the only reason,“ he said.

Nearly 70 percent of the houses sold this year in central Virginia have been for less than $250,000, according to the Richmond Association of Realtors.

Laura Lafayette, chief executive officer of the local Realtor group, said she has no way of knowing how many sales were triggered by the credit.

Still, “it’s fair to say that a significant amount is due to the credit,“ she said.

“What we are not seeing is where people go who sell their homes,“ Lafayette said. “The domino effect of people moving into higher-priced homes has not happened.“

The association supports an extension of the tax credit. But there is no guarantee that will happen, Lafayette said.

“We’d like to see it extended across the board, not just for first-time homebuyers.“ An extension would help boost the entire housing market, she said.

Some lawmakers are troubled about the cost, which could reach $15 billion, more than double the amount projected in February’s economic-stimulus bill.

Realtor groups say that without the tax credit, housing prices could fall because job losses will slow demand and this year’s gains could be reversed.

The National Association of Realtors projects that nearly 2 million first-time buyers will take advantage of the credit, with about 350,000 sales that would not have occurred without it.

The national forecast is for previously owned home sales to rise about 1 percent this year to 4.97 million. Without the credit, sales would have declined about 6 percent, according to the national group.

“The tax credit helped keep me in business this year,“ said Mary Lee Schultz, an agent with RE/MAX Commonwealth in Henrico.

Regina Ryan, a manager at a Bank of America branch in Richmond, said the bank is bracing for a rush of mortgage applications next month, as people seek to close on house purchases before the deadline.

“What a lot of people don’t understand is the credit is cash in their pocket unless they owe taxes,“ she said.

People can amend their 2008 tax returns to get the money or wait to apply the credit to their 2009 returns and get a refund.

Rutsen and Katherine Eagle plan to use the tax-credit money to buy home appliances and equipment for their photography business.

“The tax credit was icing on the cake,“ Rutsen Eagle said. The couple, in their 20s, had planned to buy their first house anyway.

“It’s very liberating to know we have financial freedom [through the credit],“ he said.

The couple found a 1,700-square-foot town house for $207,000 in Patriot’s Landing in New Kent County. “We’re moving from a very small rental to a nice home,“ Rutsen Eagle said.

For people with good credit, it’s an optimum time to buy because of the extra credit, Realtors say.

But even that may not be enough for some people.

Marie Schuster, who works in customer service at the Virginia Employment Commission, said the credit has prompted her to look at houses, but she isn’t optimistic.

“It’s tempting, but I don’t want to be house-poor,“ Schuster said.
She said she doesn’t want to leave western Henrico nor can she find anything in her price range that isn’t a fixer-upper.