The American Recovery and Reinvestment Act’s $8,000 tax credit that was made available Jan. 1 is working to help drive sales in a market that is still suffering amid the recession. It has made first-time home buyers powerful consumers in a down housing market, experts say.
The National Association of Realtors estimates an additional 350,000 first-time home buyers will buy before the Dec. 1 deadline as a result of the tax credit, which does not have to be repaid.
In June, the U.S. Department of Housing and Urban Development altered the stimulus tax incentive so buyers using Federal Housing Authority-approved lenders could get an advance on the $8,000 credit to apply it to their down payments or closing costs.
“First-time home buyers have been pretty active this year,” said Walter Molony, spokesman for the National Association of Realtors. “Right after the tax credit was put into place in late February, we saw pretty significant increases in the range of 10 to 15 percent in terms of traffic, buyers looking and inquiries.”
According to the association, first-time buyers accounted for 51 percent of sales in February, 53 percent of sales in March and 40 percent of sales in April. The numbers faded from May-July, accounting for an average of 29 percent of sales during those months as the market saw more seasonal buyers, Molony said.
But traffic and sales are expected to pick up.
“We would expect that we’ll be seeing higher levels,” Molony said. “The fact is you have to make a decision pretty soon because the clock is ticking as it can take up to two months to close.”
Tracy and Jeff Lightburn are among those who decided to make their purchase in time to collect the tax credit.
“We knew we wanted to settle down in this area,” said Jeff Lightburn. “Once they said we’ll give you $8,000 for free we said ‘Hey, let’s go searching.’ ”
The couple closed on a home in River Sound on Aug. 5.
“The $8,000 helps in so many ways,” Jeff Lightburn said. “I can build my savings back up again. In this economy, it’s hard enough to save money anyway.”
“This program is extremely important for moving some of the property that has been sitting there,” said Sherry Bitner, a senior loan officer with Blue Skye Lending, based in Lakewood Ranch.
And, because rookie home buyers will be extremely sought after now until December, many in the real estate industry are ramping up efforts to compete for their sales.
Blue Skye Lending will be hosting a weekly first-time home buyers workshop from Tuesday until Oct. 31 to educate more on the tax credit.
“This is a perfect opportunity to help people step up to the plate,” Bitner said.
Taylor Morrison is promoting a home buyers assurance program that will allow buyers to recoup up to 10 percent of the home’s original purchase price if their home decreases in value in five years.
The home builder hopes the assurance program, coupled with the tax credit, will make a purchase that much more appealing to first-timers.
In Sarasota County, single-family home sales also have improved on a monthly basis this year. The county has seen five straight months of increases in single-family home sales since January. From January to June, sales increased from 250 to 449.
Connie Huston convinced her daughter to purchase a home in south Sarasota this year to take advantage of the tax credit.
“I think it’s incredible; that’s why I’ve been really encouraging my daughter to buy,” said Huston, whose daughter is expected to close on a $74,000 home in several weeks. “When else has the government offered you $8,000 that you don’t have to pay back?”
Karen Blondin, of Blondin Mortgage in Sarasota, said the tax credit is helping many buyers who without it might not be able to afford a home.
“That’s why they’re here, of course now they can afford a home,” Blondin said. “It will allow people who haven’t saved a down payment get into a home. It’s really helping the market.”
At Neal Communities, the Lakewood Ranch home builder’s newest development, River Sound, has sold 19 homes to first-time buyers out of the 60 it has sold since its grand opening in February.
“It certainly has helped our sales,” said Jonnie Dwyer, area sales manager for Neal Communities. “It’s almost coming to an end, so hopefully they’ll come up with something new for buyers.”
Congress has already been presented with a request to extend the tax credit through 2010.
House Bill 1993, the First-Time Home Buyer Credit Extension Act of 2009, was introduced in April. The bill has 22 sponsors but there is no time line set for a vote yet because the health reform bill has taken precedence on Capitol Hill.
“We think it would be a good idea,” Molony said of the National Association of Realtors’ support. “It’s been discussed over the past couple of months, but it’s really on the back burner with regards to health care.”
