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Oct. 29 (Bloomberg) -- The Obama administration endorsed plans to extend an $8,000 tax credit for first-time homebuyers, saying it is helping stabilize the nation’s housing market.

The tax break, enacted earlier this year as part of an economic stimulus package, has “brought new families into the housing market and contributed to three consecutive months of rising home prices,” Treasury Secretary Timothy Geithner said today in a statement. The tax break will expire Nov. 30 unless Congress intervenes.

Senate Democrats have announced plans to extend the credit until April 30 while expanding it to include higher-income Americans and some who already own homes.

Senate Finance Committee Chairman Max Baucus said today the new plan would offer a $6,500 credit for homebuyers who have lived in their prior residence for at least five years. Couples earning up to $225,000 and individuals up to $125,000 would qualify for the break, Baucus said. That’s up from the current $75,000 limit for individuals and $150,000 for couples.

“The success of the American economy is closely tied to the success of the housing market - by helping to stabilize the housing market, the homebuyer tax credit has helped to shore up the economy as it begins to recover,” said Baucus. “This would enable an even greater number of potential homebuyers to take the credit.” Millions of renters earn more than $75,000, he said.

Democrats have been pushing to include the provisions in an unemployment benefits bill, which has been held up by a disagreement with Republicans over other proposed amendments.

Worst Price Drop

Lawmakers said they want to prevent home sales from slipping as the economy struggles to recover from the worst drop in home prices since the Great Depression. More than 1.2 million borrowers have claimed $8.5 billion of the $13.6 billion set aside for the homebuyer tax credits this year, according to the Treasury Department.

The Democrats’ proposal would extend the credit to home purchases under contract by April 30 so long as they close the sale within 60 days. Those buying homes worth more than $800,000 wouldn’t be eligible for the credit, said Baucus.

“We need to target the credit toward those potential home buyers who need it most, and not those home buyers who would have bought the new home without the new credit,” said Baucus.

House Plan

Any legislation would have to be reconciled with a House unemployment measure approved last month that omits the homebuyer tax provisions and extends jobless benefits only in states with the highest unemployment rates. House Speaker Nancy Pelosi, a California Democrat, is waiting to see the final Senate agreement before deciding whether to support it, said spokesman Nadeam Elshami.

While the tax credit speeds demand for homes from next year to this year, it won’t necessarily increase overall sales, said Scott Buchta, head of investment strategy at Guggenheim Securities LLC in Chicago.

“They do need to expand the credit to get more people involved, but at the end of the day you are paying people tax dollars to do what they probably would have done anyway,” Buchta said. “If it is passed, home sales of lower-priced homes should continue to hold their ground. However, if it is not passed we will probably see home sales slow down as we wait for natural demand to build up again.”

Significant Support

Senate Majority Leader Harry Reid, a Nevada Democrat, said yesterday that there is significant support among both parties for the homebuyers’ tax credit. He said the other amendments sought by Republicans are unrelated to the unemployment bill and are designed to embarrass his colleagues. Republicans want to vote on amendments on immigration and to bar funding for the community activist group Acorn.

Senate Minority Leader Mitch McConnell, a Kentucky Republican, agreed that most lawmakers support the unemployment and homebuyer measures. “We’re not that far away from an agreement,” he said yesterday.

The $2.4 billion unemployment measure would extend jobless benefits by 14 weeks in all states and provide an additional six weeks of benefits in states with the highest unemployment rates. About 1.9 million Americans will exhaust their unemployment benefits by the end of this year unless Congress acts, the Labor Department said.

To contact the reporters on this story: Dawn Kopecki in Washington at dkopecki@bloomberg.com; Brian Faler in Washington at bfaler@bloomberg.net

Albemrle Magazine, fall 2009: 

Charlottesville has been selected as the first city in VIrginia and one of the first in the nation to benefit from "smart grid" technology.  This technology will make the delivery of electricity more efficient and less costly for Dominion Virginia Power while improving customer service.  It will also promote energy conservation and environmental responsibility.  The $20 million program begins with the installation of about 46,500 "smart meters" in the city of Charlottesville and Albemarle County.  Pending regulatory approval, Dominion Virginia Power plans to install smart meters and equipment throughout its service area over the next few years.

Senate seen extending a reduced first-time home buyer tax credit

Posted Oct 26th 2009 5:30PM by Joseph Lazzaro
Filed under: Politics, Housing, Recession

Help for a Sustainable Recovery

By Lawrence Yun, Chief Economist, NAR Research

While we listen to the animated discussions surrounding the health care debate, war strategies, flu vaccines and Nobel Peace Prizes, the federal budget deficit continues to rise. There is certainly no delight in watching the budget deficit soar. The $1.4 trillion deficit in the 2009 fiscal year to September is the highest ever in U.S. history - both in sheer dollar figures as well as the highest since the Second World War if measured in relation to the overall economic pie. It's a huge burden to future generations.

Why should we be concerned? Because continuing high budget deficits could easily cause interest
rates to rise much sooner - and possibly quite sharply. Yes, there will be arguments about what federal programs work and which ones just bleed money. But Washington needs to come out with a credible plan to reduce the deficit over time.

Meanwhile, price correction - and over-correction - have wreaked havoc on the broader economy. Wall Street balance sheets were bleeding heavily before the big help from the $700 billion TARP funding. Property owners felt it, too: foreclosures spiked, strategic defaults rose among financially capable but underwater homeowners, and appraisals became messier. Most importantly in terms of economic impact, the bulk of American families have experienced a major hit to their wealth accumulation -- by more than $4 trillion in the past three years. The economy will have a difficult time gaining firm footing without government life support if home values continue to fall.

One area where federal taxpayer dollars have been effectively utilized is that first-time homebuyer tax credit. The key to any future sustainable economic recovery lies in home values stabilizing or, better yet, a return to a historical home price appreciation rate of 3 to 5 percent each year. The bubble prices crash landed, but all the excesses have already been removed. In fact, one could legitimately argue that home values have overshot downward. Price-to-income ratio is now below the historical average. The monthly mortgage payment for a middle income person buying a middle priced home is well below its historical norm.

A review of the latest data strongly suggests that the homebuyer tax credit has had its intended impact of significantly stimulating home sales. From about 4.5 million annualized home sales pace in the few months prior to the stimulus, sales have jumped to 5.1 million in recent months. That is a change of 600,000 additional existing-home sales. New home sales have risen from the mid 300,000 to low 400,000 range over the similar period. The rise in sales has been concentrated in the lower-priced home segment largely because first-time buyers are looking to stay, rightly, well within their budget.

Housing inventories, while still higher than desired levels, have been trimmed. The latest 8-month supply of existing-home inventory is much better than the double-digit figures of last year. Home values have likewise moved in an "improving" direction. Broadly speaking, they are down from one year ago, but the declines have been less steep in recent months compared to the pre-stimulus times. The median existing-home price as of August was down 12.5 percent compared to a nearly 20 percent decline early in the year. In short, sales have risen and home prices are on the verge of stabilizing.

But the housing stimulus package is set to expire. A settlement, and not the contract signing to buy, must occur by the end of November. Some first-time buyers who are signing contracts to buy in October just may make the deadline. It would be pity if the housing market which is just on the cusp of a self-sustaining recovery rolls downhill again. That could happen if potential buyers step back and inventory returns to an upward climb. Falling home values - independent of whether it is over-correcting or not - will bring back all the associated collateral damage.

A much happier scenario would be that the buying momentum continues for few additional quarters so that inventory falls back down to the normal 5 to 7 months, a level consistent with home value stabilization. Once that is accomplished, the consumer "fear factor" of waiting and waiting for a lower price later will no longer be part of the home buying decision. We will have reached a point of housing market self-sustainability. Consumer confidence will be lifted. The wealth impact of consumers opening up wallets for general consumer goods will steadily turn positive. Thus, the broader economy also gets set for a sustainable recovery without needing further stimulus dollars.

For that happy scenario to play out, a time extension on the home buyer tax credit is critically needed. At a cost of about $10 billion (if extended through the middle of next year), the housing market will likely have recovered nicely with the broader economy on track for a solid robust expansion. That $10 billion price tag is rather modest compared to the $700 billion in TARP funding and $800 billion of the broader economic stimulus package that was passed early in the year (with debate still raging over the effectiveness of that broad spending bill). Moreover, the cost of $10 billion is a static measure that does not take into account job creations and increased tax revenue from rising economic activity. Actually, if we take into consideration all of the economic dynamic responses, the homebuyer tax credit can be argued as a net positive revenue generator for the federal government.

There is nothing like economic growth to dent budget deficits. If the economy was already at full capacity, the housing stimulus would simply be moving dollars from one sector of the economy to another. But as is fully visible out in the streets, we are nowhere near full capacity. Factory capacity utilization was 69.6 percent in August, compared to an 80 percent rate that should be the case in normal economic times. On the job market front, the country is facing a double-digit unemployment rate rather than the healthy 5 or 6 percent unemployment rate. Therefore, there is a plenty of room for growth for a win-win situation for the housing market and other sectors of the economy.

Despite these vast potential benefits to the economy from extending the homebuyer tax credit, valid questions should nonetheless be asked. Is there any pent-up demand remaining? Will the tax credit just go to the people who would have bought a home anyway and thereby will simply pocket the $8,000 check? Well, the following table shows a compelling case for tapping the financially healthy renter population.

In 2000, before the housing market boom, there were 11.5 million renter households who had the necessary income to buy a median priced home at prevailing market conditions. Today, the pool of renters who can buy a median priced home is over 16 million. Just nudging even a small share - say 5 percent - of these financially healthy renters into buying via a tax credit check will mean 800,000 additional home sales. That number is sufficiently meaningful to get the inventory down to the level of home value stabilization. The housing market will then be on the path to a self-sustaining recovery.

After what we have been through this decade, it would be quite nice to observe a return of a "boring" housing market with annual price growth of a steady and normal 3 to 5 percent - without any of the fits, frenzy, and panic. A faster and firmer recovery can happen if the tax credit is opened up to more buyers by making it apply to any buyers - just just first-timers - and by raising the income limit for qualification. It would also contribute to healthy economic activity - a sustained recovery - and thus help to put a dent in the deficit. In short - it's a win/win. NAR is working hard to get that homebuyer tax credit extended. You can help - by calling, writing or e-mailing your Congressional representatives. It's good for home buyers, it's good for REALTORS®, and it's good for the U.S. economy.

For the latest economic forecast insights and analysis, visit www.realtor.org/research/research_commentary

Normally bus trips in Charlottesville have cost 75 cents for single rides.  Now there are other options:  $1.50 for a "day pass" and $20 per month for unlimited CTS trips.  There are also reduced fare s for day and monthly passes for those with low income. 

Home sales, compared to 2008, showed improvement in the 3rd Quarter. At mid-year, sales were

As reported in the CAAR Mid-Year Market Report, significantly lower home prices (down 20%

Central Valley**                                            811       661

Have Home Prices Dropped?

increase in home sales in the lower price ranges. Of the 845 homes that sold in the 3rd quarter,

Median Sales Prices

Central Valley**                                                                                  $212,708        $194,308

**numbers courtesy of the Greater Augusta MLS (note: these are average prices, not median)

Central Valley**                                                    136         121

foreclosures, short sale, and financing issues – that affect the length of time a property is on the

market. The local area actually saw a decrease in the 3rd quarter (down from 125 days at midyear)

Central Valley**                                                               139         148

attached homes in Albemarle that first showed up in the 2009 1st Quarter Market Report.

4th quarter of 2009, we will likely see a year-to-year sales improvement, but only because the 4th

REALTORS® using data from the CAAR MLS and the Greater Augusta MLS where noted. For

more information on this report or the real estate market, pick up a copy of the CAAR Real

Estate Weekly, visit www.caar.com, or contact your REALTOR®.

October 14, 2009

CAAR Market Report

CAAR Affiliate Member Gary Albert has provided us with a number of tips on home safety and improvement from the insurer’s point of view. As we have space, we will be including his and other affiliate tips in this newsletter to give our members good advice and perspective from the affiliate side of the table.

Reduce sewer and drain losses in your basement
Each year, sewer and drain backups cause millions of dollars in damage to homeowners. Prevention is the best solution to avoid the out-of-pocket expenses and inconvenience of a major clean-up.  Here are a few ways to avoid sewer and drainage back-up:

Make sure your drainage system is working properly.

• Gutter downspouts should extend at least 10 feet awar from the foundation of the hosue so water is carried away from the basement walls.
• Clear the gutters at least twice a year to prevent them from overflowing.
• Your yard should be graded to slope away from the house so surface water is drained away.
• If your gutters connect to storm sewers, keep the drain lines clear.

Anti-backflow devices reduce the chance of basement flooding. Several types of devices with manual and automatic operations are available:

• Check-valve devices allow water and sewage to flow away from the drain, preventing water and sewage from backing up into the drain.
• Gate-valve devices operate like a gate, closing and shutting off the water flow.

Sump pump systems assist in keeping out unwanted water. There are several types of pumps, including single pump and dual-level systems. A battery generator can be used to power the pump in case of a power failure. Remember to test your system monthly. It’s also important to make sure your sump pump outlet is not connected to your home’s main plumbing system.

Sometimes water still gets in. Items stored in basement areas should be on shelves or kept off the floor. The furniture should be on casters or shims and arranged away from the floor drains. 

Consult with a building code official or professional plumber for more steps you can take to reduce the chance of water damage to your home. Speak with your insurance professional about appropriate coverage in your homeowner’s policy. 

Greeene                                  205                  $346,478                 $289,900

Nelson                                      402                  $444,280                 $339,000

Orange                              357                  $371,754                $269,900

Louisa                               430                   $394,953                $269,900

 Fluvanna                                 359                   $293,025               $229,900