U.S. new home sales plunge after credits expire

Sales of new homes collapsed in May, sinking 33% to the lowest level on record, as potential buyers stopped shopping for homes once they could no longer receive a government tax credit. The bleak report from the Commerce Department is the first sign of how the end of short-term federal tax credits could weigh on the nation’s housing market. The credits expired April 30. That’s when a new homebuyer would have had to sign a contract to qualify. “We fear that the appetite to buy a home has disappeared alongside the tax credit,” says Paul Dales, U.S. economist with Capital Economics. “After all, unemployment remains high, job security is low and credit conditions are tight.”

New home sales in May fell from April to a seasonally adjusted annual sales pace of 300,000, the government says. That was the slowest sales pace on records dating back to 1963. And it’s the largest monthly drop on record. Sales have now sunk 78% from their peak in July 2005. Analysts were startled by the depth of the sales drop. “We all knew there would be a housing hangover from the expiration of the tax credit,” says Mike Larson, real estate and interest rate analyst at Weiss Research. “But this decline takes your breath away.” Sales in the South dropped 25%.

Keller Williams opens Prairieville office

From Baton Rouge Business Report

Keller Williams First Choice has opened a real estate office in Prairieville. This isn’t a spin-off of the existing Keller Williams office in Baton Rouge, says Patricia Odom, team leader and CEO for the office; rather, it’s a totally new franchise for the chain, based in Austin, Texas. Keller Williams claims to be the third-largest real estate company in the U.S. Odom says company opened the new office because it wanted to enter the Ascension market. Sue McDonald, a veteran Ascension Realtor, is the operating principal along with Mary Garner DeVoe. The office has 30 agents now, yet Odom says the staffing is growing.

Ascension rising

From Baton Rouge Business Report

Just across the East Baton Rouge Parish line in Prairieville are the attractive, brick-face, canal-side estates of Manchac Plantation and the more utilitarian suburban sprawl of Manchac Commons, within swinging distance of Santa Maria Golf Course. No sidewalks disgrace the palm-dotted lawns of the plantation homes.

Eastward, at Perkins Road and Airline Highway, is retail development galore, including a shopping plaza anchored by a grocery store, and the bane of contemporary urban planners, a Walmart Supercenter. Cars stream past the consumer jungle, which alternates between older businesses, such as Smokey’s Tobacco and Beer and Hebert Guns, and newer ones, such as a fleur-de-lis-decorated strip mall featuring florists and wine-and-spirits shops next to a fledgling United Community Bank building.

This pattern of dense housing and distant retail, elements that really only meet by way of automobile, is the antithesis of “smart growth.” The tightly clustered homes of Manchac Commons, with their matching mailboxes and recycling bins at the edge of sapling-dappled lawns, mean everyone gets a slice of the American pie, yet such development has been haphazard there to say the least, even after a surge of settlement from Orleans and St. Bernard parishes following Hurricane Katrina.

Still, if greater Baton Rouge is colloquially considered a great place to raise a family, the east bank of Ascension Parish must be the envy of its neighbors as a place to settle down and rear children. In terms of growth and development, the region is in a time of glory.

The parish is projected to roughly double in size in 20 years, and evidence of the family-friendly lure of the rural exurb is everywhere: tract home developments unfurl throughout, with children playing ball or biking or pushing go-carts.

The school district has added six primary schools since 2002, when the last new high school opened in Dutchtown. A seventh K-5 school amid the Orange Grove subdivision in Sorrento is under construction, and land is being eyed in Prairieville and Gonzales for more. The public-school system has avoided a surge in charter institutions like the one seen in East Baton Rouge, underscoring the faith that local parents put in Ascension education and its superior test scores.

“We’re fourth in the state at this point,” parish President Tommy Martinez says. “It continually draws more and more families. Rather than pay for private schools, they come here and get a good quality education.”

Although much of the population growth in the parish is ascribed to commuters north to Baton Rouge or south to metro New Orleans, Martinez also notes the attractor of “20-some chemical plants” along the Mississippi River that provide employment and critical tax revenue. “We’re not nearly as congested as the city itself,” he says. “We still have a bit of a rural characteristic.”

Yet the rapid settlement—almost 37% from 2000-09—has meant projects in Prairieville, Dutchtown, Gonzales, Sorrento and elsewhere have plunged suburban enclaves into the broad, rural area amid mobile-home parks and farmland. For those people who lament the gradual end of a more bucolic way of life apart from citified Baton Rouge, the problem is that change has already come, and much more is in store.

The U.S. Census says the population of Ascension in 1990 was about 58,000. It reached 76,600 a decade later, and it was estimated at almost 105,000 in 2009. In two more decades, officials say the parish will house more than 196,000 residents.

“The parish has urbanized,” says Jeffrey Winston, principal of Winston Associates, a Colorado community-planning firm that has been helping Ascension draft a new master plan for about a year. “It’s gone from a rural parish to a suburban parish. There are some fairly dense areas.

“There’s a lot of talk of keeping it rural. The only parts that are rural are areas that are already developed and areas with flood-plain issues. I understand they don’t want to see their neighborhoods change, and that’s not what’s being proposed. The plan is to talk about the vacant land.”

The master plan looks to establish large, mixed-use centers that would allow walkable residential-and-retail atmospheres, perhaps most dramatically including a “new town” in the vicinity of Prairieville, Winston says. “It’s not huge, but … would provide convenient shopping and kind of a central place for expanded retail and an employment center.” The plan would limit sprawl, preserve open space and likely create road and sewer taxes to install controversial sidewalks and a unified sewage system.

“The idea is to encourage ongoing rural growth, but also there’s a fairly significant demand and need for people that don’t necessarily want half-acre lots or two-acre lots,” Winston says. “That kind of growth is already occurring.”

In tandem with well-regarded public schools, suburban homestead availability drives residential demand. In February, the average sales price in Ascension fell more than $7,000 from the month before to about $196,000. While sales there matched the rate in Livingston Parish for January, they ramped up in Ascension the next month. For most of last year, East Baton Rouge topped Ascension in terms of higher prices, but not so for February, when it cost about $16,000 more on average to live in the city-parish proper.

“I have a client from Flint, Mich., who came to work for a company in New Orleans but out of the Baton Rouge office,” says Toni House, a real estate agent with Keller Williams who says higher-end Pelican Point in Gonzales, Legacy Hills in Geismar and Oaks on the Bluff in Prairieville are hot spots. “He was told to move to Ascension for the best schools.”

Doug Diez, developer and current managing partner of Pelican Point Properties, a 700-unit golfing community, says the typical homeowner there is a petrochemical engineer or plant manager, while professional couples who might split their commutes between New Orleans and Baton Rouge also find the location a “happy medium.”

For him, the Ascension growth plan oversteps its bounds where it calls for limiting development outside the U.S. Army Corps of Engineers’ designated parish sewer district to one housing unit per five acres, or one in 10 acres within the flood zone.

“I thought that was ludicrous,” Diez says. “Ascension Parish is no longer the rural parish it was when I was a kid here … dirt roads and farming. We’re losing that rural characteristic. We have one of the largest petrochemical regions in the country. It’s one of the fastest-growing parishes in the state. You don’t want to toy with that.”

Martinez says 5,000 to 6,000 lots are waiting for houses to be plunked down in northern Ascension Parish and in the Darrow area, but a buffeted real estate market took its toll.

Infrastructure issues also are waiting to be addressed. The rapid increase of subdivisions has disturbed the water quality and resulted in mandates for state officials to improve dissolved oxygen in Bayou Manchac and related waterways, and to address such pollutants as ammonia and fecal coliform bacteria, problems caused by land clearing and on-site septic systems.

There are 150 package treatment plants throughout the parish, Winston says. While individual septic systems provide for some waste separation, partially treated outflow goes into open ditches along roadways. That has pushed the surface water quality to 100% above allowable standards, according to the Louisiana Department of Environmental Quality.

“If some action isn’t taken, it maybe will be hard to get a wastewater discharge permit in the future,” says Chuck Berger, water quality modeling manager for the agency in Baton Rouge. “Development can occur, but it’s going to have to occur in a different manner. A regional sewage collection and treatment system is going to be crucial for Ascension’s plans.”

Martinez says that will happen, with a $16 million central plant set to break ground in May in Geismar, thanks to a low-interest loan from the DEQ. Another $7 million, including $5 million in Hurricane Gustav recovery money, is allotted for a trunk line to run west from the plant, but another $275 million will be needed to integrate 40,000 homes and businesses in the parish.

“Hopefully, we can accommodate that,” he says, adding, “Without a plan, it would be haphazard growth like it’s been for 10 years.”

Baton Rouge forecasted at the top 10 for home appreciation

I was reading the Business Report article this morning and noticed this little tidbit of information I found VERY interesting. Baton Rouge real estate IS the investment to make!

Still appreciating: Baton Rouge is ranked seventh on Housing Predictor’s midyear list of the 10 hottest housing markets for buyers. Housing Predictor says the Capital Region is among the places most likely to see home prices inflating over the next few years, despite the national recession. Amarillo, Texas, topped the list, with Sioux Falls, S.D. second and Biloxi, Miss. third. This is a bump up for Baton Rouge: the city was ninth on the list Housing Predictor released at the start of the year.”

Great home that is available for Lease-Purchase

I have a GREAT home in Westhaven subdivision that is available for lease, lease-purchase, or purchase.  3 bedroom/3 bath home in a growing area.  Westhaven subdivision near Bluebonnet extension.  Available immediately.  Immaculate and ready for move in!

Homes in Baton Rouge under 160,000!

There are a LOT of homes under the $160,000 range in the greater baton rouge area.  This presents  a great opportunity for first time home buyers as well as investors.  Take a look at the list of homes and let me know if ANY present an opportunity for you!

Tim HOuk

Baton Rouge foreclosures under 150,000

Just pulled up a few foreclosures in/around baton rouge that were under 150k.  Use this link to review the listings.  Call me with any questions!

Baton Rouge foreclosures

Tim Houk

301-7467

tim@timhouk.com

Tax credit for first time homebuyers

Here is the scoop on the Tax credit program:

  1. Who is eligible to claim the tax credit?
    First-time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and before December 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner.
  2. What is the definition of a first-time home buyer?
    The law defines “first-time home buyer” as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse.

    For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. However, unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.

  3. How is the amount of the tax credit determined?
    The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
  4. Are there any income limits for claiming the tax credit?
    Yes. The income limit for single taxpayers is $75,000; the limit is $150,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return. The phaseout range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $95,000 (single) or $170,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.
  5. What is “modified adjusted gross income”?
    Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine “adjusted gross income” or AGI. AGI is total income for a year minus certain deductions (known as “adjustments” or “above-the-line deductions”), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.

    To determine modified adjusted gross income (MAGI), add to AGI certain amounts of foreign-earned income. See IRS Form 5405 for more details.

  6. If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?
    Possibly. It depends on your income. Partial credits of less than $8,000 are available for some taxpayers whose MAGI exceeds the phaseout limits.
  7. Can you give me an example of how the partial tax credit is determined?
    Just as an example, assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by the phaseout range of $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.

    Here’s another example: assume that an individual home buyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by the phaseout range of $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800.

    Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.

  8. How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008?
    The most significant difference is that this tax credit does not have to be repaid. Because it had to be repaid, the previous “credit” was essentially an interest-free loan. This tax incentive is a true tax credit. However, home buyers must use the residence as a principal residence for at least three years or face recapture of the tax credit amount. Certain exceptions apply.
  9. How do I claim the tax credit? Do I need to complete a form or application?
    Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on line 67 of the 1040 income tax form for 2009 returns (line 69 of the 1040 income tax form for 2008 returns). No other applications or forms are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and first-time home buyer tests. Note that you cannot claim the credit on Form 5405 for an intended purchase for some future date; it must be a completed purchase.
  10. What types of homes will qualify for the tax credit?
    Any home that will be used as a principal residence will qualify for the credit. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences.
  11. I read that the tax credit is “refundable.” What does that mean?
    The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.

    For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed).

  12. I purchased a home in early 2009 and have already filed to receive the $7,500 tax credit on my 2008 tax returns. How can I claim the new $8,000 tax credit instead?
    Home buyers in this situation may file an amended 2008 tax return with a 1040X form. You should consult with a tax advisor to ensure you file this return properly.
  13. Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
    Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been “purchased” on the date the owner first occupies the house. In this situation, the date of first occupancy must be on or after January 1, 2009 and before December 1, 2009.

    In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.

  14. Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
    Yes. The tax credit can be combined with the MRB home buyer program. Note that first-time home buyers who purchased a home in 2008 may not claim the tax credit if they are participating in an MRB program.
  15. I live in the District of Columbia. Can I claim both the Washington, D.C. first-time home buyer credit and this new credit?
    No. You can claim only one.
  16. I am not a U.S. citizen. Can I claim the tax credit?
    Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of “nonresident alien” in IRS Publication 519.
  17. Is a tax credit the same as a tax deduction?
    No. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $8,000 in income taxes and who receives an $8,000 tax credit would owe nothing to the IRS.

    A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $8,000 in income taxes. If the taxpayer receives an $8,000 deduction, the taxpayer’s tax liability would be reduced by $1,200 (15 percent of $8,000), or lowered from $8,000 to $6,800.

  18. I bought a home in 2008. Do I qualify for this credit?
    No, but if you purchased your first home between April 9, 2008 and January 1, 2009, you may qualify for a different tax credit. Please consult with your tax advisor for more information.
  19. Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 tax return?
    Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the downpayment.

    Buyers should adjust their withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.

    Further, rule changes made as part of the economic stimulus legislation allow home buyers to claim the tax credit and participate in a program financed by tax-exempt bonds. Some state housing finance agencies have introduced programs that provide short-term credit acceleration loans that may be used to fund a downpayment. Prospective home buyers should inquire with their state housing finance agency to determine the availability of such a program in their community.

    The National Council of State Housing Agencies (NCSHA) has compiled a list of such programs, which can be found here.

  20. The Secretary of Housing and Urban Development has announced that HUD will allow “monetization” of the tax credit. What does that mean?
    It means that HUD will allow buyers to apply their anticipated tax credit toward their home purchase immediately rather than waiting until they file their 2009 income taxes to receive a refund. These funds may be used for certain downpayment and closing cost expenses.

    Under the guidelines announced by HUD, non-profits and FHA-approved lenders will be allowed to give home buyers short-term loans of up to $8,000.

    The guidelines also allow longer term loans secured by second liens to be used by government agencies, such as state housing finance agencies, to facilitate home sales.

    Housing finance agencies and other government entities may issue tax credit loans, the funds of which home buyers may use to satisfy the FHA 3.5% downpayment requirement.

    In addition, approved FHA lenders will also be able to purchase a home buyer’s anticipated tax credit to pay closing costs and downpayment costs above the 3.5% downpayment that is required for FHA-insured homes.

    More information about the guidelines is available on the NAHB web site. Read the HUD mortgagee letter (pdf) and an explanation of the FHA Mortgagee Letter on Tax Credit Monetization (pdf). An FAQ about monetization (pdf) is available at the NAHB web site.

  21. If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
    Yes. The law allows taxpayers to choose (“elect”) to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.

    Taxpayers buying a home who wish to claim it on their 2008 tax return, but who have already submitted their 2008 return to the IRS, may file an amended 2008 return claiming the tax credit. You should consult with a tax professional to determine how to arrange this.

  22. For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?
    Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount.

9297 Kingcrest, Baton Rouge, La 70810

Fantastic new listing off of Staring Lane in Baton Rouge!  This 3 bedroom home has been completely renovated and updated.  Priced well below appraised value, this house is move in ready.  Not to mention a bonus room outside with slate floors that would be GREAT for entertaining.  Fantastic for a first time homebuyer or someone looking to downsize.

Baton Rouge Housing Market named one of the best!

More good news about the Baton Rouge housing market: A real estate forecasting service says the Capital Region is one of the 10 best cities in terms of future home prices. Local Market Monitor, which produces the Home Price Forecast for more than 300 cities, says home values should remain level locally over the next 12 months. Officials with Local Market Monitor credit the same factors for Baton Rouge’s stability that have been repeatedly said during the national housing crisis: Home prices in the Capital Region never got out of hand, and economic growth has remained steady locally. Other cities with populations of more than 600,000 in the top 10 include Dallas, Houston and Rochester, N.Y. Alexandria, Monroe and Shreveport-Bossier City made the top 10 list for future home prices in cities with populations under 600,000. The worst housing markets were mostly cities in California, Florida, Arizona and Nevada, where price speculation got out of hand, places such as Las Vegas, Phoenix and Fort Lauderdale, Fla.

Read the article here