1) Get organized.  Financing will be the first hurdle you face and it’s important that you are both open and honest about your savings, debts, budgets, and credit ratings.  It’s important that you both be comfortable not only with your share of the mortgage and other housing expenses, but with the rest of your budgets too, since coming up short at the end of the month may now affect whether you have a roof over your heads!

2) Independently, list your “must haves.”  Then, sit down together and compare lists to make sure you’re not contradicting each other.  Go to open houses together to discuss which parts of the house you liked and didn’t like.  Make sure the houses you’re previewing are in your price range!  Consult your agent if you are finding that you disagree on some of the key factors–a good agent will be able to discuss different floorplans, potential renovation projects, and alternatives that would be a nice compromise.

3) Consider how you will take title (joint tenants with rights of survivorship or tenants in common), and what will happen if one of you wants to sell.  I know it’s not romantic, but being part of a couple means you have to be practical sometimes.  How will you split the equity (or loss) accrued?  It’s imperative to put your understanding into a binding written agreement – hire a lawyer to do this! Though it may seem morbid, also include what happens if one of you were to pass away or otherwise become incapacitated.  This is a good time to update your wills to ensure consistency with your agreement.

You’ll be learning a lot about each other throughout this process.  Be patient!

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“In an interview on CNN, Donovan said the administration is “concerned” about the path of the industry. He defended the Obama administration’s record on supporting the housing market, amid new signs that the market is struggling alongside the broader economy.

Donovan did not rule out a further homebuyer tax credit to support the market.”

While plenty of blogs out there are again predicting real estate Armageddon, personally, I don’t think that the huge drop in July sales really should have been ‘unexpected’ at all. But no one wants to read a meh headline like “Home sales drop as expected in July as would be normal following any artificial force on a market.” (OK, I’m sure editors would shorten that headline, should it ever exist.)

Think about all the second half 2010 first time home buyers who pulled forward so that they could close before June 30 to get their extra $8000. We essentially ‘used up’ the first time buyer segment for at least a few months, and probably the remainder of 2010. By the Spring 2011 market there will be a new crop of buyers. Unless Congress intervenes first, that is.

Note to Congress: Spring is NOT the time to have a first time buyer credit expire. It was a double whammy…end of the usual Spring market–giving a credit to buyers who were going to purchase those homes anyway–PLUS the expiration of the credit. Next time, make the credit active in the late Fall and through February so that buyers are buying up the old inventory and foreclosures that otherwise would be sitting.)

And here’s another tip…if you want to jumpstart home sales with a buyer credit, don’t start hinting around about it to the press…Secretary Donovan essentially just wiped out what few first time home buyers there currently are, who are now all going to wait to see if there’s another credit.

Stay tuned.

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Educating Home Buyers to Enable Better Decisions

Our first time home buyer classes are educational sessions designed to give an overview of current market conditions and the home buying process.  We cover a recap of the market, current trends and market stats including days on market, average sales prices, and inventory levels.  We’ll also discuss the impact of the banking system collapse and bailout, the home purchase process and common pitfalls, financing basics and a how to get started checklist.

Specific topics covered:
- Northern Virginia, DC, and Montgomery County market analysis
- Mortgage basics: rates, points, fees
- Financing basics: FHA, Conventional, Conforming, and “Jumbo” loans
- Calculating the tax benefits of homeownership
- Short Sale, Foreclosure/REO/Bank Owned basics
- Search tips
- Fees and closing costs
- Buyer agency and choosing an agent

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But I CAN tell you the same thing I recently told the Washington Examiner about the upcoming expiration of the credit:  the administration and Congress are under a lot more pressure now to control spending than they were this time last year.

Last year it was all about saving the economy (read: saving the housing market) and pulling us out of our depression/recession.  This year it’s all about record deficits, massive new entitlement programs, and the threat of inflation.  Even a bill renewing the national flood insurance program and extending unemployment benefits has been held up for weeks.   How difficult do you think it would be to renew the home buyer tax credit?

My best guess right now is that the tax credit will not be renewed in its current form.  

Learn More:

Read about the tax credit.

Attend a free first time buyer class.

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Consider these home buying statistics from NAR:

• Single female buyers accounted for nearly twice as large a share as single male buyers for both first-time buyers (24 and 12 percent) and repeat buyers (17 and 9 percent).
• Twenty percent of recent home buyers were single females, and 10 percent were single males.
• More women (15.5 million) than men (11.8 million) lived alone. Among these, women were more likely than men to own their homes (56% vs. 47%).

But is the home purchase process different for women? What about with other financial decisions like choosing a mortgage, or investment and retirement planning?  How should a single woman prioritize?  How does she protect her assets going forward?

Come hear from an expert panel of women professional in the fields of financial planning, mortgages, real estate, and conflict resolution. Learn from the experiences of others, discover your options at any stage of life, and make wise financial decisions.

Women, Wisdom & Wealth

Wednesday, March 10, 2010  6:30 – 7:30 pm

Pimmit Hill Regional Library, Falls Church, VA

** This is an educational seminar. There is no cost or obligation; however, you must be registered.  Contact us to register for the session. **

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Wenesday, March 3

7:00pm – 8:15pm

Arlington County Library

1015 N Quincy St 2nd Floor Mtg Room

Ballston (Orange Line)

We cover a recap of the market, current trends and market stats including days on market, average sales prices, and inventory levels. We’ll also discuss home purchase process, the tax credit, common pitfalls, financing basics and a how to get started checklist.

Specific topics covered:

- Northern Virginia, DC, and Montgomery County market analysis

- Mortgage basics: rates, points, fees

- Financing basics: FHA, Conventional, Conforming, and “Jumbo” loans

- Calculating the tax benefits of homeownership

- Short Sale, Foreclosure/REO/Bank Owned basics

- Search tips

- Fees and closing costs

- Buyer agency and choosing an agent

There’s never any cost or obligation to attend our classes.  Register for this free first time home buyer class here so that we may have materials available for you. More info at www.newhomebuyerclass.com

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Our first time home buyer classes are educational sessions designed to give an overview of current market conditions and the home buying process.  We cover a recap of the market, current trends and market stats including days on market, average sales prices, and inventory levels.  We’ll also discuss the impact of the banking system collapse and bailout, the home purchase process and common pitfalls, financing basics and a how to get started checklist.

Specific topics covered:

• First Time and Repeat Buyer Credit Details
• Arlington, Northern Virginia, DC, and Montgomery County market analysis (average sales prices, days on market, etc.)
• Mortgage basics: rates, points, fees
• Financing basics: FHA, Conventional, Conforming, and “Jumbo” loans
• Calculating the tax benefits of homeownership
• Short Sale, Foreclosure/REO/Bank Owned basics
• Search tips
• Fees and closing costs
• Buyer agency and choosing an agent

Details:

Tuesday, January 26th 7:00 – 8:15
Arlington Central Library
1015 N Quincy St 2nd floor meeting room
Ballston (Orange Line)

Though there is no cost to attend, you must contact us to register since seating is limited and we need to make sure that materials are available for you.

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VHDA’s program lets borrowers use a second mortgage to finance up to 5% of the sales price (enough to cover FHA’s 3.5% down payment requirement) by using the $8000 first time home buyer tax credit–effectively allowing borrowers to “monetize” the credit.  The second mortgage helps cover the down payment and closing costs, with zero interest and no payments for the first 12 months. Borrowers then have the option of paying it down within the first 12 months, using their $8000 credit to pay it off, or paying it off over 29 years.

There are restrictions on the program, of course.  Purchase price is limited to $408,100, and gross household income for two or fewer persons cannot exceed $86,900 for the Washington, DC, MSA, including Northern Virginia.

The deadline for the program matches the newly extended deadlines for the tax credit, so buyers must be under contract by April 30 and settled by June 30, 2010.

If you need help starting your home search, or finding a lender, please contact us.

* * * * * * * * * *

Learn More: Sign up for our free first-time home buyer class at Arlington Central Library on Jan 26 at 7:00 pm (registration required) Details and registration information can be found here.

Search the MLS

See more Buyer Resources

* * * * * * * * * *

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These changes obviously made a lot of buyers very mad; those who purchased in 2009 but didn’t meet the income eligibility now look like suckers (but take heart…at least you had low prices, fantastic interest rates, and likely a lot more choice in inventory than today’s buyers have.)  And what about those souls that purchased back in 2008 when the “credit” was just a $7500 loan? (Again, take heart…low rates, low prices, and you really did have the pick of the litter on inventory.  Just look at the inventory lines on this graph of Northern Virginia Homes for Sale and compare the 2008 line to today.  What good is a big credit if everything available to buy is not worth buying?)

With inventory so tight, why do we need an extension and expansion, and on top of that a new category (the so called “move up” buyer, though in reality it could just as easily be a “move down” buyer, or even just someone who wants to convert their current residence into an investment property)?

The first reason is that the DC area is unique with its suddenly tight inventory.  DC has long been predicted to lead the nation’s real estate recovery given the incredibly strong job market, well above average incomes, and stimulus money flowing freely.

The second reason is that the pool of buyers has dwindled towards the end of the credit period (which was due to expire at the end of this month) so we needed to find a way to increase it again.  Why didn’t this initial rush of buyers lead us to a full recovery?  Again, it varies by area…the progress towards a stable market in DC was much more evident than in the rest of the country.  But two complicating factors: (1) the pool of entry level housing dropped too quickly and buyers were left circling and competing against other buyers for remaining homes and (2) much of the inventory they were buying were vacant, foreclosures, or short sales–meaning that those sellers were not, in turn, trading up to buy the next level of housing. So the recovery stalled at the entry level price point (in our area, I’d approximate this at $450k and below).

The extension and, more importantly, the new category attempts to address the second issue in particular.  First, now that a higher AGI buyer has an incentive, that category might be buying up inventory in the “next tier” of pricing, driving a recovery up the ladder, so to speak.  Second, by creating a new category of credit eligible buyers–the $6500 crowd–it’s likely that those trading up will also be selling their entry-level homes in order to afford their new purchase, relieving some of that inventory pressure on the first time buyer category.   So in other words, just as the $8000 stabilized entry level pricing, the hope is that the $6500 will stabilize “trade up” level pricing.

But those people are all underwater on their homes and can’t sell, you say!  Ah, the eligibility restrictions cover that: one must have owned and occupied the property for 5 of the last 8 years (meaning they purchased in 2004 or earlier), and while there will certainly be some who cashed out equity and are indeed underwater, there will be many more who have plenty of equity in their property and want to use this opportunity to move into the home more appropriate for the next stage of their lives. This last point, of course, might not play out if those owners decide to hold on to their current property as an investment, and simply buy a second property.  I suspect the people who do that will be limited though: the AGI limit, even when raised, along with the $800,000 maximum purchase price will limit people in the DC area from taking full advantage of that.

It will be interesting to see how this all plays out, but I suspect we’ll see an increase in the entry level category of inventory in early 2010, both from continuing foreclosures, trade up buyers, and simply sellers who recognize that the market at the lower price points in our area has stabilized and maybe is even on the upswing in certain neighborhoods.

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Ready to start your home search? Contact us to be notified of our next free First Time Home Buyer Seminar or to meet for a cup of coffee to discuss market conditions where you want to buy.

Thinking of selling? If you have a property priced below $450k or so and in a desirable neighborhood, there very well could be a lack of inventory.  Sell “high”, and use the proceeds (along with historically low interest rates) to buy “low” at the next pricing category.   Read more below:

Read more: How Do I Protect Myself if I Buy and Sell a Home at the Same Time?

Sign up for a free MLS Market Snapshot to see what’s been going on in your neighborhood (Northern Virginia, DC, and Maryland only)

Read more: Six Myths About Choosing a Listing Agent

Read more: Marketing Your Home

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It’s officially passed the House and Senate, and is now awaiting the President’s signature.  Along with the extension of the $8000 First Time Buyer credit (now applies to any buyer under contract by April 30, 2010 and settling by June 30, 2010), there is now a new credit category: long-time residents of the same principal residence which has been given the shorthand name of “move up buyers”–though in reality it could just as easily apply to “move down buyers.”

If a homeowner has owned and used the same residence as their principal residence for any five consecutive years in the last eight (as of the date of purchase of a subsequent residence), then they are treated as a “first time home buyer” eligible for a (up to) $6500 tax credit when they file their next return.  Other key points:

• This credit applies to purchases under contract between December 1, 2009 and April 30, 2010.
• Income limits are higher than with the previous credit: $125,000 AGI for a single individual and $225,000 AGI for a married couple (and then phases out until $145k/$245k).
• Homes with a ‘purchase price’ (as defined by the IRS) above $800,000 are ineligible.
• Thanks to all the fraudsters out there, purchasers must now submit documentation of purchase along with their tax return.

Some other restrictions apply (e.g., must keep the home for at least a year), but the key points are above.  Update 11/14: here’s a nice summary article that appeared in the Washington Post.  Some other FAQs that have since been answered:

• There is no requirement that you sell your current home.  You can rent it out, or sell it later.  BUT you must occupy the new home as a primary residence
• Many types of dwellings are eligible: new construction, existing homes, condos, mobile homes, or boats that function as a primary residence BUT in no case can it cost more than $800,000 or the property is ineligible.
• If you close between Nov 6 and Dec 31 of 2009, you can claim the credit on your 2009 return or even amend your 2008 return (important to know if your income has changed, making you ineligible in 2010!)

This is key news for our area, which has seen a dramatic drop in housing inventory, especially at the first time buyer price point–this could well create demand in the next category up (up to $800,000 that is) of homes, and will create some breathing room, inventory wise, for the continuing first time buyer demand.

This could be the ideal time for these move-up or move-down buyers:

1. Prices for inventory at the first time buyer price point are stable or even rising
2. Interest rates are still at historic lows
3. Upper end homes have dropped (and are continuing to drop) in price

Combine these three points and you get “sell high” and “buy low”. If you’re thinking of selling your home to “move up” or “move down” and want more information on the tax credit, please contact me.

Read More: Why is the $6500 tax credit important?

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Read more: How Do I Protect Myself if I Buy and Sell a Home at the Same Time?

Sign up for a free MLS Market Snapshot to see what’s been going on in your neighborhood (Northern Virginia, DC, and Maryland only)

Read more: Six Myths About Choosing a Listing Agent

Read more: Marketing Your Home

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