Time Running Out
The tax credit for first-time home buyers expires Nov. 30. Because deals can take up to 60 days to close, now is the time to buy.
Real estate agents almost always advise that now is the right time to buy a house.
For first-time buyers hoping to seal the deal before the government's $8,000 tax credit expires Nov. 30, that advice is timely - and right on the money.
From contract to closing, real estate transactions typically take 45 to 60 days. But you cannot claim the credit - 10 percent of the purchase price up to $8,000, with specific income caps - if you have not made settlement by November's end.
Despite tighter credit and lenders' demands for more and more documentation, "it still can be done in six weeks," said Re/Max Town & Country agent Lynn Ayers in West Chester.
But buying sooner is better than later, observers in the Philadelphia area market say, since housing prices appear to be stabilizing, even rising, as are 30-year fixed mortgage rates (now about 5.14 percent), both of which threaten to make houses less affordable.
"I've been looking seriously for about a month," said Tisha Miller, 30, a counselor for the Family Training Program in Philadelphia, who has been renting in Center City for nine years.
"I'm hoping to have everything completed by November," said Miller, who wants a two-bedroom house with outdoor space for about $300,000, assisted by money inherited from a grandfather.
But unlike Miller, few other local first-timers appear to have turned plan into action.
"There have been many inquiries, but there doesn't seem to be the same sense of urgency," said Jerome Scarpiello, president of Leo Mortgage in Ambler. "It seems more people took advantage of 'Cash for Clunkers.' "
Obviously, money is tight for a lot of people these days. Ayers described one couple interested in buying a house, "but their car died, and they couldn't afford both."
Yet for Mike and Jackie Dietrich of Narberth, who have been house-hunting since November, getting back half the down payment they've been saving in two years of marriage is a great incentive.
"Our agent, Pam Gabriel at Weichert, is sending us everything she sees," said Jackie Dietrich, 28, who sells advertising. She and Mike, 29, a project manager in the city, bid on a couple of houses in the Narberth and Havertown areas earlier in the summer, but neither was accepted.
"We're hoping to find that dream, and so we don't want to make a mistake," said Jackie Dietrich, who also wants a good school district for the children they plan to have.
The importance of the tax credit to the depressed housing market is hard to overstate, economists and housing-industry officials say. Some are attributing to the incentive many of the positive home-sales numbers reported nationally in the last three months.
"Somewhere in the neighborhood of 1.8 million people will take advantage of the tax credit, but we're projecting an additional 350,000 sales this year as a result," said Walter Molony, a spokesman for the National Association of Realtors in Washington.
Nationally, there are 4.09 million previously owned homes and 271,000 newly built ones begging for buyers, so 350,000 additional sales is a big boost.
Wayne Norris, regional sales director for Hanley Wood Market Intelligence, which tracks new-home sales here and elsewhere, said the tax credit had had its biggest effect on entry-level buyers.
"The market has been waiting for the urgency to buy for quite some time, and the tax credit provided that," he said.
So far, however, the credit for first-time buyers has not had a big effect on sales in this region.
"If anything, the tax credit only helped stop their slide," said economist Kevin Gillen of Econsult, of Philadelphia. "Going forward, I expect there to be a burst of sales activity this fall as fence-sitters rush to take advantage of it before it expires."
Mario and Beth Pinguli of Philadelphia, married for about a year, signed an agreement for a $244,900 townhouse in Aston and are sweating out a home inspection.
"The tax credit is important, but we also live in a small apartment and want to get out from the city wage tax," said Beth Pinguli, 25, who like Mario Pinguli, 29, works for the Department of Homeland Security at Philadelphia International Airport.
If all goes well, the closing is set for early October, well in advance of the deadline.
"If we can buy it in time, the tax credit certainly will give us a break on the down payment," said Beth Pinguli.
Bruce Hahn, president of the American Homeowners Grassroots Alliance in Arlington, Va., said that the housing industry wanted the tax credit extended and expanded and that there are bills in Congress designed to do just that.
"These bills will increase the 10 percent first-time home buyer's tax credit limit from $8,000 to $15,000 and expand the credit's eligibility to apply to any buyer," he said.
"The legislation would also eliminate the current $75,000/individual and $150,000/couple income caps, and extend the tax credit for one year from date of enactment," Hahn said.
Such legislation is critical, he added, because of predictions that the economic recovery "will be mostly jobless when it begins," which could delay a housing recovery and increase foreclosures.
Without a major turnaround in the housing market or economy, Gillen said, "Congress and the president will face significant pressure to renew or extend [the tax credit]. They'll do it, but not until the last minute."
Which has Miller concerned that buying now could mean she would lose out on an even bigger break.
"If that happened, I'd wait," she said.