On January 15th the IRS released a new form for home buyers who want to claim the tax credit when they file their taxes this year.  This is Form 5405.  Form 5405 is a revision of the previous  2009 First Time Home Buyer Tax Credit so that the current 2010 Home Buyer Tax Credit program is covered. 

I would like to point out 2 important changes:  Along with Form 5405 you MUST include documentation such as your RESPA closing statement.  Because there is more documentation required to claim your tax credit for both a repeat and a first time home buyer, your tax return must be filed manually.  So remember – more documentation and manual filing is what you’ll have to do. 

For more information, just go to the IRS website .  It’s really not hard to take care of this and since you will have purchased your home recently, it shouldn’t be difficult to access your RESPA closing statement.  As always, I recommend that you consult with a tax professional.

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There’s a new website in the internet that’s all about your house – from doing a repair or renovation to tax credits to protecting yourself from a scam artist.  Created by the National Association of Realtors, it’s in beta testing on the web right now but I’ve taken a look at it and, frankly, I’m very impressed.

Go to http://www.HouseLogic.com and take a look yourself.  Buying a house in Bergen County is the start of a long term relationship with your home and your community.  House Logic helps you ”protect, maintain and enhance the value of your home” in so many ways.  I found tips on how to do economical repairs that pay big dividends to how to get tax credits for energy efficient improvements. 

If you aren’t a homeowner and are thinking of buying a home, this site is for you too.  There is so much excellent information about homeownership that you’ll get a great education. 

The site is very detailed about all sorts of things.  For example, House Logic has an entire section on improving your insurance score.  Most people don’t realize how devastating a bad credit score can be.  When I tell my clients that a poor credit rating even affects your insurance premiums they are usually surprised.  Here you will learn how a credit rating affects your homeowner insurance premium.  It’s a fabulous website for consumers.

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If you are a home buyer and you qualify for the first time home buyer tax credit, time is running out for you to find a home.  You must buy a home by November 30th and because getting a mortgage these days often takes 45 days, many buyers feel pressured to make a decision now.  As a result, a first time home buyer who qualifies for the $8000 Tax Credit may find himself scrambling to get into contract this week.  However, I’m wondering if some of you aren’t making a mistake.

$8000 is nothing to sneeze at but a buyer may be missing out on a home value that far exceeds the $8000 credit – short sale opportunities are still available.  There are many homes for sale with steep discounts because they are a short sale and you may find a house that is a better “fit” for you in a short sale than trying to buy a home that you really don’t love just because of the tax credit.

In the New Jersey MLS this morning, searching for short sale homes shows that of the 3,796 single family homes for sale, 352 are a short sale.  There are also many that are described as potential short sales.  For our purposes, let’s say that a bit more than 10% of the Bergen County housing market is a short sale.   This figure has been pretty constant this year.  The bottom line is that there are other opportunities out there.

Even if you can’t find a home that works in time for the tax credit, you shouldn’t go into contract on something that isn’t the right home for you and your family.  Opportunities come in many ways.

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Great news for home buyers! U.S. Housing and Urban Development (HUD) Secretary Shaun Donovan announced yesterday, May 29th, that the Federal Housing Administration (FHA) will allow home buyers to apply the Obama Administration’s new $8,000 first-time home buyer tax credit on FHA mortgage loans. Previously the tax credit only applied to conventional mortgages. The only catch is that the tax credit cannot be used towards the minimum 3.5% down payment. But, this is still terrific and a great help for people who need to use a FHA insured mortgage loan.

Secretary Donavan said that the FHA’s objective in doing this was to help stabilize the housing market by stimulating more home sales across the US and it certainly should do so. With the ability to apply the tax credit to purchase costs, buying a home now becomes affordable for thousands of people and affordable enough to get thousands to jump off the fence and into a house.

FHA loans are extremely popular with first time home buyers because qualifying for a FHA mortgage is a lot easier than qualifying for a conventional loan. The ratios are easier and the down payment can be as little as 3.5% although I must tell you that I do not approve of buying a home with such a low down payment. What I tell my home buyers is to wait until you’ve saved up at least a 10% down payment.

While interest rates went up this week, they also came down on Friday so we’re still in the 5-5.5% range for what most people really qualify for in a mortgage. This has been where it’s at for the past several months throughout the spring.

The reason the first time home buyer market is critical to the housing market is because this is where the housing domino chain begins – when a home buyer buys a house, he buys it from someone who often moves on to a bigger house and so on and so on. The entire chain of transactions begins with the first house that is sold and that’s your first time home buyer.

If you look at the real estate market the picture you see is a pyramid with the least expensive homes on the large bottom (mostly first time home buyers) and the most expensive at the very top. Without those large bottom rows of buyers, the real estate market will collapse. So the FHA, by accepting the $8,000 tax credit on its loans, has helped tremendously to maintain the strength and stability of real estate.

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What Can We Expect in 2009?

I can answer this with one word – improvement. I had projected 10% depreciation but that was before the stunning sub prime mess was revealed. While we have “Monday Morning Quarterbacks,” the truth is virtually no one knew of this growing menace. The Tenafly market for homes in 2008 ended with 25% fewer sales and 18% depreciation.

Yet Tenafly homes did better than most; our market is more resilient than you’d think. Selling a home took less time in 2008 and first quarter figures indicate we’ll do even better this year.

Appraisers are still deducting 1% per month but say this will end later in the year; Jeff Otteau, the renowned analyst of New Jersey’s housing market, announced in mid March that 2009 will end with 9% depreciation statewide. This dovetails with a second half recovery; homes in Tenafly will see it during the fourth quarter.

By recovery I do not mean that prices will go up; they won’t. They will stop going down and the market will stabilize. We’ll stay there for another year or two before any upward swing bringing us to 2012 or later.

Although unemployment will continue to increase over the next several months, it should level off by year’s end. Unfortunately unemployment will not improve quickly. For now we can only estimate how this will affect our market; its impact takes a while to be felt.

But Washington funded the FHA to continue lending and increased the tax credit to $8,000 with no payback required. This enabled first time buyers to get in the market. With the lion’s share of price depreciation done and mortgage rates so low most of us have never seen this, home buyers are back in the market. Activity has really picked up since March 1st with no signs of slowing down.

What is certain is that Tenafly real estate remains one of the most in demand markets in the NYC metropolitan area. This will not change. While we can’t escape the storms of life, the truth is that Tenafly weathers them better than most in Bergen County and the New York City area.

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The figures are in and the real estate market in Bergen County is doing OK.  It’s still a buyer’s market for homes but you can see some signs of improvement.

In January I had written that the real estate market in Bergen County would shift during the 4th quarter of 2009 and stabilize.  From then on for a few years we would be working in a narrow range before turning upward again.  This time it would take longer than it did in the early 90’s to rebound fully but being stable is good.  So far my projection is still on target.

Most of the reports at that time were for this to happen once we were solidly in 2010 – well, the media reports are singing a different song because things have changed.  And so has the market.

If you look at the number of homes coming onto the market and going under contract, what you’ll find is very interesting.  For the homes becoming active in the New Jersey MLS, there’s been an 11% drop during the first quarter of 2009 but the pace of homes going under contract is the same this year as it was last year.  Do I hear the word stable anywhere?  Yes, this is indeed a sign of stabilization and that’s, to quote Martha Stewart, a good thing.

For the first quarter in both 2008 and 2009 the Active to Under Contract ratio is 3.9 to 1 in the New Jersey MLS data.  This means that the pace of home sales is maintaining itself and it’s also quite respectable – the ratio of a strong seller’s market is 2 to 1.

Looking closer to see what happened we find that in 2008 the rate at which homes became active was pretty normal – a gradual progression as you moved more into the year.  But in 2009, January and February were anemic and then we had a 32% explosion upward in March.  Do you think that the spring real esate market is back in Bergen County?  I sure do.

Home buying activity has really picked up since March 1st and home sellers have correspondingly jumped into the real estate market.  Why would they wait until now to put their home on the market for sale?  Because the atmosphere was so negative at the end of 2008 that it made many homeowners hold off.  What’s changed?  Well, just to mention a few items – the $8,000 tax credit, liberalization of FHA mortgages, even lower mortage rates, home prices not seen in nearly 8 years and the natural spring rhythm of home buying.

While home values are still going down – another 5% for the rest of this year – I still feel that the market will be stabilized by the 4th quarter.  What we’ve seen so far this year in maintaining the pace of sales and in the recent surge in home buying activity certainly point to this and also to a good spring market for Bergen County homes.  In fact, I won’t be surprised to learn that the bottom of the real estate market in Bergen County was the end of 2008 and the very beginning of 2009.  2009 will be a year of change.

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Here’s the New Jersey Association of Realtors announcement for a free webinar on the tax credit for buying a home that expires on December 1st – sign up for this Friday’s free  webinar to find out how to qualify for up to a $8,000 tax credit whether you’re buying a home in Bergen County or elsewhere:

FREE Home Buyer Tax Credit Webinar – April 3 at Noon

The countdown to December 1, 2009 has begun. Learn how to take advantage of the tax credit during a free Get the Real StorySM webinar on Friday, April 3, 2009 at noon. Register for the webinar on Friday by visiting http://www.njar.com/rs_register.php. The website address for participating will be e-mailed to you in advance of the event. Please note, space for the live event is limited.

NJAR^® Executive Vice President Jarrod C. Grasso, RCE will officially kick off the new REAL Story website during the webinar, and then Linda Goold, tax counsel for the NATIONAL ASSOCIATION OF REALTORS^®, will discuss the detailed advantages of the first-time buyer tax credit and how purchasers can claim the credit

If you can’t make the webinar, you can find answers to questions about today’s market in New Jersey anytime at www.REALstoryNJ.com. The webinar will also be available on the site to view after it is presented live.

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