Profile picture for gio14

Stimulus plan..should I wait or buy...

Been reading alot about the proposed stimulus plan for the housing market..4% rates.  should I wait to see if it goes thru or get stuck now with a 5.3%.  First time home buyer..what to do?
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February 04 2009 - San Diego
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Answers (139)

Don't worry about rates, find the right house.  You can always refinance.

Typically high rates lower price, low rates higher price.

You can not use the 8,000 as a down payment as it is a credit against your taxes.
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March 28 2009
Profile picture for arnie84
You can use the $8,000 for you down payment?
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March 28 2009

Interest rate and prices are both incredibly low right now!  Unfortunately, no one knows where the bottom will be for interest rates or pricing.  If you are a first-time home, it's a great time to use the $8000 tax credit for your down-payment or closing costs.  If you have more questions or want more in-depth answers, please don't hesitate to shoot me a call.

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March 28 2009
Profile picture for sunnyview
I saw this chart posted today that shows the relationship of interest rates to sales price. It was new to me, but I thought it was interesting.
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February 19 2009
High interest rates lower prices, low interest rates higher prices. 

Even now with the excellent low rates there is not a lot of sales going on and the banks want blood from a rock as well.
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February 19 2009
Profile picture for javi30
 "however interest rates will  rise and when they do, affordability will go down"


wich will drive precis much lower!!!!


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February 18 2009
The credit may help my son, a first time home buyer, so I won't have to help him as much

But its not going to help the majority of the country, certainly not anyone I know and a very small small small part of my business. And not anyone loosing there homes now.  I'll start marketing to college students.  Sure a first time buyer buys the small house and then the seller buys a bigger house.   I don't think so in these times.  Most people I know are down sizing, even with there kids moving back in.
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February 18 2009
Dear San Diego:

A lot of people are asking that same question now, as prices and interest rates are at historical lows.

I like how you are actually taking interst rates into serious consideration in your home buying process, as I believe not enough buyer's seem to think about this.

One thing to consider, is how price and interest rate's are, and are not related.  

Buyer's for month's have been obseesed about price, yet often don't understand how much interest rates play in their purchase.

As an example, a 10% reduction in price is almost completely wiped out by a 1% gain in interest rates.  Now I know what some will say, "well the interest rates are faily stable, so I shouldn't worry about that." 

Unfortunately, that's what they said last time the interest rates went up! 
If it weren't for the Federal Reserve artificially keeping them low, the rates would have already gone up by now. And no, I don't know when they are going to go up either, however interest rates will  rise and when they do, affordability will go down.

Trying to "time things out" is very difficult, and the best we can do is make an informed decision based on our particular situation.

Hope this helps,

Johnny 
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February 18 2009
Again, I would definitely ask an actual tax professional on this one as well. :)
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February 17 2009
By the way- yes, you can get back more than you paid in taxes for the year. This is a tax credit, not a deduction. Even if you were not required to pay a penny in taxes, you still receive the entire $8000 from the Fed if you buy a home and meet the criteria (first time homebuyer, max. income of $75,000 single or $150,000 joint). Also, this credit can be used on your 2008 taxes OR 2009 taxes. Anyone who has already filed 2008 could still file an ammended return and receive the credit this year.
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February 17 2009
The $8000.00 is a true "credit" however certain states have already found ways to put the credit to work toward the buyer's down payment at closing. Missouri, for example, is working to create short-term loans on the tax credit up to $6750. The state would loan borrowers money to be used at closing toward the downpayment- then when buyers receive the tax credit from the IRS, they pay back the state. I would expect other states to follow suit.
All in all, it's too bad this credit is only for "first time" homebuyers, but it should also help move-up buyers, who will now have an easier time selling their starter homes. I read somewhere that this credit is expected to bring 300,000 new homebuyers to the market- which is a decent start.
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February 17 2009
Profile picture for sunnyview
The tax credit as I understand it is a "credit" not money in your hand at closing. Did I miss some update to the bill? As I read it, buyers would certainly not be getting more back than they paid in taxes for the year. A credit is great, but it only reduces your taxable income minus the amount of the credit right. I would think that your tax refund is likely to be bigger, but no more than you paid in to taxes in the first place. You can't get back what you didn't pay in the first place. Did I miss the way the credit works?
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February 17 2009
Hi gio14, this very question was discussed at our staff meeting today - think about this - what is the incentive for the banks to lower rates even further?  The cost of money to them is rock bottom, it is not likely to go lower. The mortgage pro that spoke to us today was not optimistic that we will see 4% or under and so my recommendation would be to not wait it out. 
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February 17 2009
Renters are good, I am happy to rent to anyone that can pay their rent. And interesting observer you are wrong the probability of you being effected by any of those listed is great, unless you live in Vermont :)  And yes you can help change the world to be a better place and create jobs while doing it.

As to waiting to buy - nothing wrong with that - hopefully you had bought back in 1985 let it run up till 2005 and sold.  My ex-partner shorted the sub-prime market, I didn't did you?  He's the type that will make money in good times and bad.  Why ? Because he doesn't care.  Its the game.

A friend of mine also said you can always get something for less, but if you know what your getting and its a fair value then be happy with it and live with it. 

You know when to sell stocks and sell homes is when the elevator operator is telling you what a good value this stock is or you better buy a home its only going up you don't want to miss out.

Each person has to do whats right for them.  I am not saying don't wait, but I'm also saying there are good opportunities out there. If you are buying something and plan to sell in the next few years, you should hold off on your purchase.  If you are buying, because you have a family, the school system is great, you plan to be there the next 10 to 15 years, then it may make sense to buy.  Not in areas where there is land to build and build and build.

Also if you buy for lets say 150,000 and the rate is 5% constant 7500 a year, 10 years is 75000  plus you get tax benefits and appreciation if any.
You rent for 700 per month 8400 a year 10 years 84,000 out of pocket, most likely rent increases, no tax benefits, no forced savings, no potential for appreciation.

If if goes down 25% or 37500 over that same period, You'd still be ahead of the game. 

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February 17 2009
Profile picture for madtowndoc
Updated question:  I will be buying a condo in April, and I will need to have the first time homebuyer credit in hand prior to closing.  Before the stimulus plan came about, I was planning to submit my taxes this week, taking advantage of the $7500 refund, which I would hopefully receive before the April closing.  The IRS' terms clearly state that you can receive the credit even if you have not yet purchased the home, as long as you plan to close by July 2009.  In regard to the $8000 credit, it sounds like I would not be able to receive the money until I file for taxes next year?  Is it therefore possible to receive the $7500 credit this year, and the $8000 next year, or can I only receive one of the two?  Either way, I need to have the money in hand by the end of April 2009 (~2 months).  Thanks.
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February 17 2009
Profile picture for interested_observer
"Listen if you want doom and gloom I can dish it out with the best of them.......Issues to truly worry about ...Lack of drinkable water, earthquakes, tidal waves, volcano's, meteors hitting earth, lack of food, biological warfare."

Although anything is possible, I'm not too worried about any of the potential disasters you've listed since the probability of me being affected by any of them is relatively low and for most of them, there is nothing I could do to prevent them from happening.  However, in the case of home prices, in my opinion, the probability of home prices in almost all areas of the U.S. being significantly lower a year from now is very high and I can protect myself from financial harm by waiting to buy.

I guess when someone doesn't have a good counter argument to all the data that suggests in most cases, it's still not a good time to buy a house, you can always resort to characterizing anyone who isn't a real estate cheerleader as a nut who thinks the end of the world is here.
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February 17 2009
If you will be buying between January 1st 09 and before December 09, you will get 8000 USD back with your taxes the year after. Which basically means, 8000 free Dollars. You never really know, what interest reates are doing. They are low now, as well as there are really good deals out there with a lot to chose from.
I good time to buy!
 

Oliver
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February 17 2009
Profile picture for interested_observer
"This is if there is a need to buy a house not a want to buy a house."

Human beings have a need for shelter that is met whether they buy a house or rent one.  So if I interpret you correctly, you're essentially saying that no one should buy since there is never a true "need" to buy.
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February 17 2009
Profile picture for klarek the realist
"How can we be positive,  easy we're alive."

Way to lift our spirits.
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February 17 2009
that downpayment assistance by Missouri seems pretty smart. Wow, a government agency that thinks! Maybe I should leave California and move there. Especially now that my registration for my two trucks will be over $2000 a year. It defeats the purpose of paying them off.
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February 17 2009
I agree that the government is not the answer in fact they are the problem.  Who in there right mind would spend the 160,000,000+ to get elected? 40,000,0000 on a party?

A stimulus bill that has $30,000,000 to protect squirrels.

Your congressmen, senators elected officials are in it for their medical insurance, and pensions.   We should be so lucky.  Barney Frank a man from my home town is the worst of them all.  Its amazing how they all can lie to us with a straight face and blame the other guy.

Enough about that.

How can we be positive,  easy we're alive.

 Now its up to us to make things change, our country has to go back to its grass routes and become the leader in technology, manufacturing, education and any new horizons.

 What made America great where the Vanderbilt s, Rockefeller, Edison, Franklin, Fulton, Bell, Ford, Steve Jobs, Gates

Not Bloomingdales, Mercedes, Cancun.....
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February 17 2009
The right price is what a ready willing and able buyer would pay today based upon all the comparable properties today.  This is if there is a need to buy a house not a want to buy a house. If you want to rent and wait out the market you can do that.  My market place may be different than yours.  Values may be down about 6% but that is in the outlying areas, close in to the city it has stabilized and prices are up over last year. But the bad areas before the boom are the bad areas today.

If you can't take the ups and downs of the market then you shouldn't be in it.

 They have always been places to live in not investments, its the public that saw it as a commodity as oppose to shelter. If you want an investment buy an income property, but they have risks as well.

I did not use my properties as ways to fund things I couldn't afford as many people did.  Now they are in trouble and they want me to bail them out.  I still find it difficult to pay all my own bills that keep rolling in.

Listen if you want doom and gloom I can dish it out with the best of them.......Issues to truly worry about ...Lack of drinkable water, earthquakes, tidal waves, volcano's, meteors hitting earth, lack of food, biological warfare.

Remember Back To The Future 2 when the earth was a disaster and Biff was running the casinos, not far from the truth

So we should all focus on the positives and try to correct this mess. 
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February 17 2009
Profile picture for interested_observer
"If you find the right house at the right price buy it."

Please define "the right price".  If what I would have to pay today is 25% more than I could buy the same or similar home for a year from now, would I be paying the right price?

I'm also confused about a house not being an investment.  A few years ago, the NAR was running campaigns talking about the average increase in home value over the last ten years and how much of the average family's net worth was from the equity in their home.  Now that a significant percentage of home owners owe more than their house is worth, houses have magically transformed from investments to places to live.

As I've stated previously, anyone who follows the advice of a Realtor or mortgage broker regarding whether to buy now or wait is a fool.
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February 17 2009
If you find the right house at the right price buy it.  Especially if you are going to live in it,  and  your in a strong metropolitan area, that has colleges, hospitals, and technology sectors. You can always refinance if rates come down further.

Homes are not investments they are a place to raise a family and a forced way of savings.  
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February 17 2009
If you live in Missouri now is an excellent time to buy.  We have up to $6,750.00, paid at the time of closing, to be used for help with down payment and closing costs.  It is a tax credit advance loan, and as long as it is paid back when you receive your Federal tax credit in 2010 the loan has no interest, just a small processing fee.  With downpayment assistance and low home prices there has never been a better time to buy.
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February 15 2009
Hi madtowndoc -
The latest I heard is that the new $8000 amount - if that is what it ends up being - will be retroactive back to 1/1/2009 so that should not be your concern.  The real difference between the two is not the $500 in the amount.  The difference is that the $7500 credit as it stands now needs to be paid back - it is a zero percent loan.  The new $8000 will be a credit that does not need to be paid back according to all accounts.  That is a big difference!

We should know more by Monday.
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February 13 2009
Profile picture for madtowndoc
I will be buying a condominium in April of this year, need to close before May 1.  I am wondering if I should take advantage of the $7500 refund now (hoping that it comes back in time for closing), or wait for the $8000 from the new stimulus package.  It's only a small difference ($500), but any amount would help.  The main issue, however, is that I have no idea when I would be able to actually take advantage and physically receive the $8000 once the bill is passed.  Is there very little chance I would see the $8000 before May 1, and therefore should just go for the $7500 right now?  Also, we will live in the condo for 4 years, and meet the income limitations.
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February 13 2009
Profile picture for Inqusitive1
With the economy so bad and most likely getting worse I am just sitting in a rental. I have the down payment but am afraid if I buy a home and things get really bad I may loos the house anyway.
Interest rates are definitely down and the (hopefully) first time home buyer program will pass but then again will a low house payment and 8 grand help if someone looses a job or the economy falls further and you loos everything you had hoped for??
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February 12 2009
Profile picture for Inqusitive1
With the economy so bad and most likely getting worse I am just sitting in a rental. I have the down payment but am afraid if I buy a home and things get really bad I may loos the house anyway.
Interest rates are definitely down and the (hopefully) first time home buyer program will pass but then again will a low house payment and 8 grand help if someone looses a job or the economy falls further and you loos everything you had hoped for??
I have been in CA all my life, after what the Governor announced today I will never buy a home in this state.
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February 12 2009
The $15,000 credit got dropped from the Stimulus Package - they have compromised on $8000 tax credit for first time homebuyers, but it still needs to be signed (hopefully by Monday) by Obama.
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February 12 2009
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