First Time Home Buyer

One of the country’s biggest home builders, Pulte Homes is offering dreams for many potential first time home buyers. Pulte Homes Inc. states that it will match the new $7,500 tax credit with its own $7,500 discount on homes for first time home buyers.

Pulte Homes Inc., one of the country’s largest home builders, says it will match a new $7,500 tax credit for first-time home buyers with its own $7,500 discount on homes. This comes as a dream come true for many who are looking to take advantage of all the incentives and enticements as well as the lower housing prices to become first time home buyers. According to Pulte, the goal of this offer which will be extended to any buyer of a Pulte home is “to draw attention not only to our homes but to the housing market in general,” reports Richard J. Dugas, president and chief executive of Pulte. With the decline in housing prices, the devaluation of homes due to the increase of vacant homes from foreclosures this may help those who are ready buy and take advantage of all of the incentives.

The tax credit that was signed into law last week was lobbied hard for by home builders. It is all part of a bigger housing rescue package that is beginning to spread. Currently the housing industry is working hard to get the word to consumers and is hoping the tax break will help pull the crippled housing market out of danger. President of the National Association of Home Builders, Sandy Dunn, states that many potential first time home buyers are now in a good position to buy a home but are understandable nervous about the market. In a conference call Monday Dunn says “This tax credit will help them off the fence”.

According to the NAHB, 40% of all house buyers are first time buyers. The first time home buyer is seen as the key to restoring the housing market. This is generally because the first time home buyer does not have to unload a home before they are able to buy a new one. Focusing the incentives on the first time home buyer now can help to stimulate the industry enough to make it a prime industry for all once again and eventually help stimulate and restore the economy on the whole.

Individuals looking to qualify for the tax credit can have an adjusted income of up to $75,000 a year or a combined adjusted income of up to $150,000 a year for married couples filing jointly. Under the law a person must not have owned a home in the last 3 years to qualify as a first time home buyer. Additionally, the home purchased must close between April 8, 2008 and July 1, 2009 to qualify for the credit.

The individuals who qualify for the tax credit will be matched by Pulte Homes in a discount when they purchase a Pulte home. This may just steady the nerves of the apprehensive first time home buyer who is ready to buy that first home.

The news reports good news for many first time home buyers purchasing a home between April 9, 2008 and July 1, 2009. These first time home buyers may be eligible for a tax credit under a new bill that has been signed by the legislation and is anticipated to be signed by President Bush. The tax credit will be $7,500 or 10% of the purchase price of the home; whichever is less. This is creating a lot of excitement for many potential first time home buyers; however, a shadow looms over the excitement. Initially looking at the tax bill it looks to be a great deal. A tax credit is more valuable than a tax deduction as the credit is a dollar for dollar reduction in taxes. Additionally the tax credit in the bill is refundable which benefits filers whose federal taxes are less than $7,500. For instance, a filer who owes $2,000 in taxes will still receive $5,500 and a filer who gets a tax refund of $2,000 will receive a refund of $9,500. This does not go without a few catches though, these include:

• Pay Back: Although labeled at tax credit it is more of an interest free loan. A first time homebuyer who claims the credit will have to repay it in installments over 15 years. The repayments will start in the second year after the home is purchased. A home purchased and claimed on the 2008 tax return will have an additional $500 a year in taxes starting in 2010 and going on for 15 years. Should the home be sold before the 15 years the remaining balance is due at closing unless the home is sold at a loss.

• Income Limits: There are income limitations to be eligible for the tax credit. AGI of below $75,000 for single or head of household filers can receive the whole credit while they will only receive a partial credit if the AGI is between $75,000 and $95,000. AGI of below $150,000 for married filing jointly are eligible for the whole credit while they will only receive a partial credit if their AGI is between $150,000 and $170,000.

Additionally the legislation allows homeowners that do not itemize to deduct up to $500 in property taxes each year for single or head of household filers and up to $1,000 for married filing joint. Joint fliers who pay property taxes in 2008 will be eligible for a standard deduction amount of up to $11,900 and the single homeowner will be eligible for up to $5,950.

Naturally the amount of the property tax deduction is not allowed to exceed the actual amount paid in property taxes. For instance, a single filer who paid $400 in property taxes will only be allowed to deduct $400. Additionally, unless Congress votes to extend the property tax deductions it is limited to the tax year 2008.

All through the later part of 2007 and the first part of 2008 consumer confidence began falling. The good news is that currently the reports of consumer confidence falling has ceased. The bad news is the falling home prices have not ceased. Today there were two separate reports released that were rather conflicting. One reports that economists point to an encouraging stabilization in consumer attitudes and the other reported on a continued erosion of the value of homes. This poses two entirely different views and understandings of the economy today creating unpredictable effects in the housing market. Standard & Poor’s/Case Shiller’s monthly report states that the median price of a home fell a whopping 15.8 percent in 20 of the biggest metropolitan areas in May. This is right on the heels of a nearly equally steep drop in the prior month. Also reported by the National Association of Realtors; existing home sales for June declined 2.6 percent in May and 15.5 percent since June of 2007. Despite these reports, we are led to believe that consumer confidence is stabilizing.

In all of the 20 metropolitan areas that were surveyed, home prices were down in the month of May. Not surprisingly, the falling home prices match an increase in the nations foreclosure activity adding the over abundance of housing that is not moving on the market. This is making the prices of the homes go down. This would be great for those looking to buy homes; particularly first time home buyers, if the economy were not in a state that prevents people from purchasing new homes. Fortunate for some first time buyers, there are programs that are being created and others that are still in place to assist them in buying first homes. The first time home buyers may be the only ones celebrating, homeowners who must sell a home before purchasing a new home are not as happy.

Ordinarily home prices going down are celebrated by people wishing to purchase a home; right now it is still spelling trouble for the economy as a whole. The decline of home value means a decline in equity. Homeowners who purchased their home recently might now find themselves ‘underwater’, or owing more on the home than what the house is worth.

Over the last ten years the United States experienced a real estate boom where consumers could tap into the equity in their homes to pay for home improvements, education and other large dollar items which all served to fuel the consumer economy. Today with equity falling these loans are not being taken out and the fuel to the economy has lost its spark. But, by report consumer confidence has held for this month but according to the conference Board it raised less than a point in July. Never-the-less this slight raise was the first increase since December.