Tax Credits Are Over, But Rates Are Lower!

Earlier this year, there were a couple of fairly widespread predictions regarding what would happen to the housing market right around April of 2010. First, it was predicted that the Federal Tax Credit would expire on April 30th, and not be extended. This, of course, turned out to be true. Second, it was predicted that when the US Government stopped buying mortgage backed securities in March, interest rates would begin to tick upwards, with some predicting rates in the 6% range. This has turned out to be untrue. In fact, rates have actually moved the opposite direction and have dropped into the upper 4% to 5% range. And, if we do some simple math, we can see that in many cases our buyers have a better purchasing opportunity than when we had the tax credit!

Let’s look at a couple of scenarios:

-  In April, a homebuyer purchased a $180,000 home with 20% down on a 30-year mortgage at 5.21%, which is about what rates were in April. So, they financed $144,000 and the monthly principal and interest payment was $791.61. Let’s assume they qualified for the $8,000 homebuyer tax credit.

-  Today, a homebuyer purchases that same $180,000 home with 20% down on a 30-year mortgage, but at a rate of 4.84%. Financing the same $144,000 at this new rate will save the buyer $32/month, or $11,738 over the life of the loan. Sure, it’s not money in their pocket at tax time, but it’s a much greater dollar amount than the tax credit was able to provide!

Let’s look at it another way….

-  Today, a homebuyer purchases a house with 20% down on a 30-year mortgage, but at a rate of 4.84%. Keeping the monthly payment at the same $791.61 as the April tax credit buyer used, today’s buyer with today’s rate will have another $7,732 in purchasing power with no payment increase. And just like the tax credit, improved purchasing power provides an immediate benefit.

And of course, mortgage rate reductions benefit ALL HOME BUYERS, not just first time home buyers. Plus, unlike the Federal Tax Credit, there’s no deadline forcing you to make a decision right away. As long as rates stay favorable, your buyers can take the necessary time to find the home they want.

It’s a simple, but powerful concept. The opportunity for buyers didn’t end when the tax credit expired. In fact, in most cases it has improved.

You can follow Jake Stanton on Twitter @JakeStanton.

photo credit: Dano

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I’ll admit it, when I moved to Iowa in 1992, it was a little against my will. I was excited to be together with my soon-to-be fiance, but Iowa? Let’s just say growing up in New Jersey, I didn’t give Iowa a whole lot of thought, but if I had, “progressive Midwestern state” would not have come to mind.

What better time than now, when faced with a shortage of workers, and needing to become more competitive economically, to present Iowa as a 21st century state? The caucuses could not have done any better for positioning Iowa as a forward thinking, revolutionary place that the world should be paying a little more attention.

Iowa had already attracted my sister in law, Barb, back to Iowa from Chicago about a year ago. She was stuck in traffic and saw a billboard advertising Iowa’s “rush hour” as a business man getting rushed by his kids in the driveway. We love having her and her partner Betti here where they can watch our kids grow up and be more involved in their lives. But when they moved here, I wondered if they would struggle to be welcomed back to Iowa as a lesbian couple in the same way we talk about welcoming young Iowans back after they’ve seen the outside world.

Today, I got my answer, and I am thrilled! I’m tired of trying to explain to my daughter that while Betti loves Barb the same way I love Barb’s brother (Dad to my daughter), until now they couldn’t get married. I told her that it didn’t make any difference to us, or to her status as flower girl, but the truth is, it makes a huge difference. They already had been committed to each other for years, they don’t need a commitment ceremony, they need a marriage, and now it can be theirs, and ours to enjoy for them.

It’s another great day in Iowa history. Iowa has become the 3rd state in the nation to legalize gay marriage, and the timing couldn’t be better. For Iowa, this decision isn’t about whether you agree with the politics, it’s about presenting Iowa as a place that’s modern, progressive, and tolerant. A place that will welcome a young Jewish entrepreneur from New Jersey as well as an Iowa raised lesbian returning from Chicago. Betti and I will spend the day gloating to Washington and New Jersey, our respective home states. States that can only say they are progressive.

You can follow Tanya on twitter @TanyaKeith