Washington DC – the BEST Place for Real Estate in 2009

In a recent survey released by Forbes Magazine, Washington DC was named the best place to invest in Real Estate in 2009. The turmoil in the financial and credit markets coupled with 4 years of falling home prices have created a “perfect storm” for first-time homebuyers and investors. While the Forbes article focused on Real Estate Investment, this current Real Estate market in the DC area (which includes Maryland and Northern Virginia) provides an opportunity for a wide spectrum of home ownership not seen in the area in more than half a decade.

Home prices are affordable again for many home purchasers, and  coupling that with interest rates hovering at or below the 5% mark really makes for an attractive purchase proposition. However, because of the decline in home prices, many individuals who currently own their home are unable to take advantage of these tremendous market conditions as they are hamstrug by the loss of equity in their asset.

Enter the first-time homebuyer.

First-time homebuyers were essentially priced out of the market during the recent Real Estate bubble of the early to mid 2000’s. Many watched with chagrin as prices kept going up, and up, and up, and up—and kept right on renting. Now that home prices have declined and interest rates are more than attractive, first-time buyers are on the move. This group of purchasers are not saddled with existing homes that harbor dramatic losses in equity, and are able to consider a wide selection of inventory while making a decision.

Many of these folks began recognizing this unique opportunity as early as November 2008, and market activity for this group of consumers has picked up dramatically as we head deeper into 2009. The way I see it, 2009 will be the year of the savvy first-time homebuyer—the homebuyer who seizes this chance at homewonership and rides this “perfect storm” of market conditions into 2010 and beyond.

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The Obama Home Buyer Tax Credit De-Mystified

Here is my first cut at the Tax Credit the new bill contains.  Please consult your tax advisor (or congressman….lol) for additional details.

 There is a new $8,000 first-time home buyer tax credit.

 It does not replace the $7,500 tax credit issued last year (that one must be paid back).  If you purchased your home between 4-8-2008 and 12-31-2008 you do not qualify for the new tax credit.

1. The $8,000 tax credit is available for “qualifying” home purchases from 1-1-09 until 12-1-09    (that is correct, December 1^st) 

2. The tax credit will reduce the tax you owe dollar for dollar.  This is great!  A tax credit reduces the taxes you owe, a tax deduction reduces your taxable income, trust us, you come out way ahead with a tax credit. 

3. If you sell your home within 36 months, or if it is no longer your principal residence within 36 months of the purchase date, you will have to pay the full $8,000 back.  If you sell the home and your gain is less than the credit, you will only have to repay up to the amount of the gain.  If you think you might sell before the 36 months, I would clarify if we’re talking capital gain here.  Remember, capital gain is your adjusted sales price minus your adjusted cost basis. 

4. Married filing separately, you only get $4,000 of the credit.  Single tax filer gets the full $8,000.  

5. You must be a “first time” homebuyer under the 2008 definition.
   Definition:  Either you have never owned a home before, or you haven’t owned or co-owned one during the 3 years preceding the date you close on your 2009 purchase.  Careful planning is key here. 

6. The eligibility for the tax credit is phased out starting at $75,000 adjusted gross income for a single taxpayer and $150,000 for married taxpayers filing jointly.  Remember this is “Adjusted Gross Income”. 

7. You can use state and local tax exempt mortgage revenue bond programs to finance your home and still be eligible.  The 2008 version prohibited this. 

8. This must be a principal residence, not a second home or investment property.  

This is a powerful incentive to buy a first home, or purchase one if you haven’t owned in 3 years.   With low home prices and low interest rates, this credit is a boon to many buyers who will take advantage of this.

 If there was ever a time in the last 3 years to purchase a home, that time is now.

 (This commentary provided by S. Scott Avery, President, Avery-Hess, Realtors)

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