REAL ESTATE MARKET UPDATE

An Information Service of RE/MAX Alliance/Boulder Valley

July/2009

Numbers!  What would the world be like without numbers?  What would our lives be like without numbers?  We wouldn’t know how old we were (maybe a good thing) or what time our favorite show appeared on television (maybe a bad thing) or when we were supposed to be at work (we would just show-up or not).  We’d all become followers of the sun for telling time.  But numbers do exist and they are an important part of our daily lives.

As they relate to real estate, numbers are certainly the most critical element buyers and sellers are faced with.  How much should I sell my home for (a number)?  How much should I buy a home for (a number)?  How much can I borrow (a number)?  How much is that doggie in the window (sorry, I digress)?  Below are some numbers that are representative of the business of real estate.

1.      Median Price:  The Median Price of a geographic area (subdivision, community, county, etc.) is where an equal number of sold properties are on each side of the number in the middle.  As an example, in the numeric sequence 5, 9, 12, 17, 47, the Median Price is 12.

2.      Average Price:  The Average Price is the value of all the sold properties added together and then divided by the number of sold properties.  Using the numeric sequence above, the Average Price is 18.  In this example, one number (47) can skew the overall average.  Four of the properties actually sold for “less” than the Average Price.

3.      Absorption Rate:  The Absorption Rate is the time it would take to sell all the homes in a geographic area assuming two things: (1) The sales rate remains the same as it has been for a specific period of time.  (2) No new listings come into the market.  As an example, there are 39 active listings in a community.  Over the course of the past six months eighteen homes have sold in that community.  Based on that sales rate (3 per month), it would take thirteen months for the market to “absorb” the current inventory of homes.

            Enough about numbers, lets look at some facts. (Just imagine they aren’t numbers.)   Below is a brief overview of the housing market in our area by locale for single family homes from IRES (the Northern Colorado MLS).  

                                           2008 (Thru June)         2009 (Thru June)        

                Area                 Average Sales Price      Average Sales Price      % Change

             Boulder                         $653,092                     $650,937                     No Change

             Superior                        $450,009                     $396,996                     -13.35%       

              Louisville                      $391,030                     $379,142                     -3.13%

             Lafayette                      $383,741                     $339,536                     -13.01%

             Longmont                     $258,168                     $235,998                     -9.39%

             Suburban Plains            $532,612                     $559,990                     +5.14%

             Suburban Mountains    $429,465                     $411,478                     -4.37%

             Broomfield                   $398,679                     $375,476                     -6.18%

                                                  =======                    =======                    =======

                Average …               $434,403                     $407,026                     -6.73%        

Benefits for Homeowners

While some people go all out in building green in order to lessen their home's "footprint" on the environment,most consumers want to upgrade their homes to experience green benefits like these:

• Have more control over future maintenance costs,

• Lower, manage, and better predict monthly expenses,

• Enjoy health benefits, including lower emissions and better air quality, and

• Improve their home's resale value and marketability.

Pick One Project ... or Two

Even for homes where it doesn't make sense to remodel, homeowners can still enjoy economic and health benefits by implementing one or more green improvements as they are able:

• Tankless water heaters heat water only on demand.

• Low-E windows have a thin layer of metal that helps keeps the hot side of the window hot and the cool side cool, thereby saving energy on heating and cooling bills.When purchasing windows, pay attention to the U-factor, which measures the rate of heat transfer, and also the SHGC rating, which measures how well a window blocking unwanted heat gain. Low-E windows are well worth the price, since homes can lose up to 25% of their heat through the windows. Properly installed low-E windows can reduce energy loss by 30-50%.

• Storm door installation provides extra protection against inclement weather and can increase energy efficiency by up to 45%.

• Paints and materials that contain low- or no-VOC (Volative Organic Components) cut down on landfill pollutants as well as help keep indoor air clean.

• Spray foam insulation increases to 100 times its initial volume and therefore better fills in air gaps than fiberglass insulation. It's also non-toxic and has a lifetime guarantee. Energy savings: Up to 50%.

• Landscape responsibly. Xeriscaping with native and drought-resistant plants helps conserve water. Strategic planting of trees and careful maintenance of existing mature trees can help reduce energy costs by shading a house.

• Retrofitting radiant heat can be pricey, but the savings in energy costs mean it will eventually pay for itself. Radiant heat is often more comfortable than forced air, and better for people with allergies.Additionally, people don't get cold feet and therefore tend to keep the thermostat a degree or so lower as well.

• Programmable thermostats allow homeowners to automatically reduce heating and cooling during times when it is not needed as much. Energy savings:As much as 5-20% off a monthly energy bill if the heat is turned down 5 degrees at night and 10 degrees during the day when no one is home.

• Ceiling fans may provide enough cooling for some rooms and can reduce the need for air conditioning.

• Caulking windows and doors is one of the easiest and least expensive ways to improve energy efficiency in a home- in fact, it will usually pay for itself in energy savings within a year.

• Replace exterior wood doors with insulated metal or fiberglass doors. Wood is not a good insulator, and fiberglass doors now give the appearance of wood while insulating 5 times better.

• Choose LED lighting. LED stands for "light emitting diodes," which are small devices resembling a computer chip sandwiched between thin layers of plastic or glass.When charged with electricity, the diode emits lights. Benefits of LED lighting: It has no hazardous chemicals like other lighting options.The price over its lifetime (good quality bulbs can last more than 50,000 hours) make it an economical alternative to standard lightbulbs. LED lights generate very little heat and 80-90% of electrical power goes directly to generating light, compared to incandescent bulbs where only 5-10% of the energy is used to create light (the rest creates heat). Finally, LEDs give more light with less glare, a plus for an aging population.

• Low-flow showerheads and toilets help homeowners conserve water.

• Solar orientation is one area homeowners can't change about their existing home, but a passive solar retrofit means adding solar features to an existing house. For example, the location of sunrooms should be true solar south for greatest heat gain.

• Smart irrigation technology may be the biggest change in lawncare since the automated sprinkler system. Evapotranspiration (ET) controllers automatically adjust watering based on the weather and typically pay for themselves in water savings after about two years. Please keep in mind that this is only a partial list of many projects that can increase the value of a home, as well as improve comfort and reduce energy costs. For more information on these and other green recommendations, visit:

• www.nahbgreen.org

• energystar.gov

• www.usgbc.org

I work with alot of first time home buyers and have had many questions regarding the $8000 tax credit.  Here's a nice piece about First Time Home Buyers Tax Credit.

First-Time Home Buyer Tax Credit
Answers to the most commonly asked questions
by Land Title Guarantee Company
May 2009

In its efforts to stimulate the economy and revive the housing market, Congress has enacted legislation that provides a tax credit of up to $8,000 for first-time home buyers. The American Recovery and Reinvestment Act of 2009, signed into law on February 17, 2009, is a stimulus package that makes a non-repayable tax credit of up to $8,000 to qualified first-time home buyers purchasing a principal residence on or after January 1, 2009, and before December 1, 2009.

• The tax credit is for first-time home buyers only. For the tax credit program, the IRS defines a first-time home buyer as someone who has not owned a principal residence during the three-year period prior to the purchase.

• The tax credit does not have to be repaid.

• The tax credit is equal to 10 percent of the home's purchase price up to a maximum of $8,000.

• The credit is available for homes purchased on or after January 1, 2009, and before December 1, 2009.

• Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.

The following information has been edited for length and is used with permission from the National Association of Home Builders' website, www.FederalHousingTaxCredit.com.

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 homeowner. 

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 or 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. 

How is the amount of the tax credit determined?
The tax credit is equal to10 percent of the home's purchase price up to a maximum of $8,000.

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 phase-out 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.

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 such as foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions, and deductions for higher-education costs. 

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 phase-out limits. 

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. 

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 69 of their 1040 income tax return. 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.

What home types 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.

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 15. 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). 

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.

Do I qualify if I bought a home in 2008?
No, but if you purchased your first home between April 9, 2008, and January 1, 2009, you may qualify for a different tax credit. For more information, visit FederalHousingTaxCredit.com.

Wed May 20, 2009 

Great clip-

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