Eight-Thousand Dollars is not worth it
Most of you searching for details on whether there will be an extension of the $8,000 Federal First Time Home Buyer Tax Credit are probably reading and hearing what I am–who knows?!?
As of late September 2009, there is no official bill in Congress or Senate that will extent the Tax Credit, or replace it with a similar style plan. For that, we will just have to wait and see.
What I can tell you right now, is that if you’re reading this before November 30th, 2009 and haven’t signed a contract for the purchase of a home: Stop Chasing 8,000 Dollars.
I know, I know…Eight Grand is a lot of money to a lot of people, particularly young buyers looking to get a nice deal on a home. But what I am seeing in the Minneapolis and St. Paul Housing Markets right now is that the “good deals” are few and far between. Specifically, there are fewer nice houses available for low prices, and those that remain are literally gobbled up in a matter of hours after being listed.
What does this really mean? It means if you’re chasing $8,000 to try and close on and be eligible for the Tax Credit, you are going against a TON of competition.
So, my advice to you if you’re not currently approved for a loan or under contract with a seller to buy their home: Wait.
Whether that’s 3 months, 6 months, or a year–just wait it out.
Here are the 5 main reasons I feel you would be better served to wait:
1) The $8,000 Tax Credit may be extended or even expanded in 2010. While it’s hard to predict the future, there remains the possibility that a similar program exists next year for people buying homes. No telling how much money or what the guidelines will be, but you could still get some extra bonus money if things work out in Congress.
2) The competition is too stiff right now. Under the price point of $150,000 the twin cities market is actually a seller’s market, which means prices are stable or even rising in a few areas. This means more buyers than available houses listed for sale. The result is much more difficult buying experience.
3) Fix-up and Down Payment Funds are dry right now. Multiple cities and counties around the metro area have rolled out programs to help buyers fix-up properties or even assisted in buyers’ down payments this year. Unfortunately with the current economic climate, many of these programs are simple out of funds. This is likely a result of more buyers entering the market this year, and in some cases these programs will be available again at some point down the road.
4) More time means more saved up money for you. A lot of buyers I have met during the past 6 months have had very little money saved up for down payment and closing costs. When buying your first home there are a lot of costs you need to be aware of, and many buyers have been getting “gifts” from family/friends in order to afford the property. In my opinion, you may actually benefit from waiting 6-12 months in order to save up some more cash to help with these costs. That way if you have something to fix unexpectedly in the house, you’ll be better able to handle it financially.
5) Forcing yourself into a house can end up costing you much more than $8,000. If you push yourself into buying so you can get this $8,000 Tax Credit, you may just be buying a big problem. Being desperate can come back to bite you hard in the end, so by forcing things right now, you could find yourself paying much more later on in repairs, legal fees, etc. This is the main reason I am advising people to wait until next year.
Remember, there will always be another home that fits your needs. And by waiting for a less competitive market you may actually get a better deal on a property than someone who hurriedly buys now simply to “cash in”.
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