By Robert Evatt, Tulsa World, Okla.
Feb. 28--The free money is still out there.
In fact, thanks to changes in the tax laws, the up to $8,000 in tax credits for buying a home has been expanded to many owners of existing homes and up to 70 percent of all buyers, said Gary Soderstrom, president of the Home Builders Association of Greater Tulsa.
But with just two months to go until the expiration date, relatively few buyers are stepping forward to take advantage of it. Soderstrom said many people simply might not realize the opportunity is there -- or that it's short-lived.
"We've done a poor job of letting people know that the expanded tax credit now affects most of the market," he said. "You don't have to be a first-time buyer anymore."
Federal incentives of up to $8,000 for first-time buyers were first implemented early last year, and Congress voted to extend them beyond the original November deadline. In the process, those who have owned and lived in a home for at least five years were extended a similar credit of up to $6,500 to encourage them to trade up and get a better or larger dwelling space.
Both credits are nearing the end of their lives, as qualifying homes must be under contract by April 30 and close by June 30.
Yet the reaction to the second round of the federal home buying incentives has, at least for the Tulsa area, been a far cry from the first.
Pete Galbraith, president of Coldwell Banker Select in Tulsa, said the first-time tax credit helped Tulsa's home market recover from the economic
turmoil that had dragged sales down last year. While first-quarter sales were quite low, second- and third-quarter sales jumped significantly and helped the year end just 3 percent below 2008's levels.
"If we didn't have the first-time homebuyer tax credit, the damage would have been a lot more than 3 percent," he said.
Jack Hodgson, president of the Greater Tulsa Association of Realtors, said he and the association were pleased by the resulting rush.
"The tax credit was really embraced by the public," he said. "They really took it to heart, and we did a tremendous amount of business toward the end of it."
But the sales weren't spread evenly. Since first-time buyers tend to purchase smaller, less-expensive homes, those types of homes dominated sales. Galbraith estimated 65 percent of his firm's sales were in the starter-home range.
Suddenly demand for smaller homes exploded. Many builders who had been weathering the recession by selling off their excess inventory and taking on few new projects found the courage to put up hundreds of new, if small, homes.
But not all builders have been able to benefit. Soderstrom said local builders often stick to specific price ranges and plan accordingly with their land purchases. Since the credits are relatively short lived, builders including his own Gem Properties were unable to take advantage of the boom.
"There are a lot of us that weren't helped by the first-time buyer credit, since we build homes above that level," he said.
Sales of more expensive homes lagged as well. Galbraith said that the price ranges didn't just have a lack of a stimulus, but they were hit by greatly tightened lending standards that made jumbo mortgages much harder to come by.
"Not only are upper-end homes selling slower, they're much harder to finance," he said.
Though the November extension of the tax credit helps give incentives to more expensive homes, it hasn't sparked a rush to buy them.
In fact, sales of starter homes have dropped as well. Overall sales of homes in December 2009 were 4.3 below those in December 2008, according to the most recent GTAR figures. Hodgson said he expects January to be weak as well, though that may be largely due to the winter storms.
Galbraith said the problem is, in part, the tax credit's past success. He and other real estate professionals strongly encouraged potential buyers to buy a home before the deadline, and because so many people rushed in, the first-time segment of the market may be temporarily tapped out.
"We're just now starting to see the market reactivate with a new batch of homebuyers," he said.
Awareness might also be a problem. Soderstrom said buyers may not know that the credit was extended, or that it was expanded for existing home buyers.
Or, for that matter, that the deadline is fast approaching. Soderstrom said he's heard from buyers and sellers who are choosing to wait under the mistaken belief the tax credit will still be there.
"There are people who we talk to who think that real estate sales only happen in the spring and summer," he said. "They tell us they won't put their homes on the market until then."
He and Galbraith said they and others in the field will try to increase awareness of the tax credit and its deadline in the coming weeks. Galbraith believes the deadline will remain firm this time.
"We're not hearing anything about the credit being extended again, like we did last time," Galbraith said.
The facts about tax credits Who is eligible for the tax credits?
First-time buyers are eligible for up to $8,000, depending on income. Existing homebuyers must have lived in their home for at least five years to qualify for up to $6,500. The income limit for single taxpayers is $125,000; the limit is $225,000 for married taxpayers filing a joint return.
How do I receive the money?
The money is in the form of a credit that can be applied to last year's or this year's federal tax return and will result in a refund if the credit is greater than your tax liability. If you have already filed the 2009 tax return, you can still claim the money by filing an amended return.
When do the credits end?
Homes must be under a binding contract for purchase by April 30, with closing completed by June 30. The deadline applies to both first-time and repeat homebuyers.
For more information, visit tulsaworld.com/fedhousetaxcredit. Robert Evatt 581-8447 robert.evatt@tulsaworld.com
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