The $787 billion stimulus bill that was signed into law last month included an $8,000 tax credit for first time home buyers. This is designed to stimulate the economy and revive the housing market and, when combined with incredibly low mortgage interest rates and a good supply of homes, if you qualify you should get moving.  Here are a few points to consider:

• The tax credit is equivalent to 10% of the home purchase price, capped at $8,000.
• It applies only to first time home buyers, defined as someone who has not had an ownership interest in a principal residence for three years before buying a house.
• It applies only to those who close on the purchase a home from January 1 to December 1, 2009.
• The tax credit does not have to be repaid and it is ‘refundable’, meaning qualified buyers can take advantage of it even if they don’t have an $8,000 tax liability. You will get a refund check for anything over what you owe up to the $8,000 limit.
• The tax credit is subject to income limitations. Single buyers need a modified adjusted gross income of $75,000 or less and $150,000 for married couples. Those earning more may be eligible for reduced credits.
• Buyers have to own the home for at least three years or, in most cases, the credit must be returned.
   

Since it is a tax credit it is not available for down payments although it does allow state housing finance agencies to help buyers by advancing the credit as a loan. A buyer also does not have to wait until next years tax filing to get the credit if they change their employer federal tax withholding by submitting a new W-4 form. Also, home owners get to deduct mortgage interest and property tax from their income so this means another $2,000 or so in annual tax savings.

The biggest hurdle for first time home buyers is the initial cost of purchasing a home but with an FHA loan it is possible to purchase a qualifying home with as little as 3.5% down and about 2.5% for closing costs and prepaids including mortgage insurance. FHA loans allow the seller to pay virtually all of the closing costs and prepaids and also allow family members to gift the down payment required. There may also be down payment assistance available from the Colorado Housing and Finance Authority (CHFA) and from the City of Fort Collins Home Buyer Assistance (HBA) program.

There are currently about 600 homes on the local market priced up to $200,000 so there are lots to choose from. Let’s take an example of a purchase with a contract price of $187,500. This will require a down payment of $6,562 and closing costs and prepaid costs totaling around $4,688 for a total of $11,250 and a mortgage of $180,938. The current interest rate for FHA 30-year fixed rate mortgages is 5.0% so the monthly payment of principal and interest will be $971 per month. Taxes, insurance and mortgage insurance payments will add about $200 per month so the housing payment will be calculated at around $1,170. In addition, there may be a home owner’s association fee to be added to the monthly housing payment. The gross annual income to qualify for this mortgage is less than $50,000 and in addition to the housing payment you are allowed about $500 per month for other installment debt. The benefits of home ownership are many but the key right now is locking in a low interest rate that is fixed for up to thirty years plus the $8,000 tax credit plus the deductibility of mortgage interest and property tax. In the first year, this will provide a reduced income tax liability of $10,000 and if you don’t owe this much, the IRS will send you a refund check!

If you are ready to get started please contact us today; we can provide more information on the tax credit, down payment and closing cost assistance and explain the home buying process. Also, if you know of anyone who should consider it so please pass on the information…there has never been a better time to become a home owner!

We are now, officially, in uncharted territory! We reported last month on January closed real estate sales which totaled 138 homes and stated that “it is the poorest sales month in recent memory”. Change that to “it was the poorest sales month in recent memory” as February chalked up a previously unheard of total of just 127 sales. From 2000 to 2008 February has averaged 215 closings so while sales are down 29% from 2008 to 2009, they are off 40% from average and are less than half of the peak year. It is important to remember that these are closed sales and that the showing activity and the contract writing took place in December and January so we are talking about water that has already gone under the bridge. Many potential home buyers were waiting to see how the ‘Housing Stimulus Plan’ would affect them and we really have seen a noticeable increase in showing activity over the last few weeks so there are buyers out there and hopefully this will be reflected in closed sales over the next few months.

For the last five months, sales are down over 20% from the comparable five months a year ago and that 2,760 annual sales figure we tossed out last month is already looking optimistic. Not that anyone should be trying to predict anything about housing sales or the Dow Jones or the price of tea or any other factor in today’s shaken economy.

The average selling price continues to hold up with a small 3% decrease in February and a 2% decline for the year to date. The selling price has been partially held up by an inventory that is 15% lower than a year ago but marketing times for those homes that are sold are also increasing with February sales on the market for 135 days compared to 126 days for January sales.

For what it’s worth, sales in the Loveland area are down 16.5% for the year to date and the average selling price is off 4.7% to $243,423. Sales in Weld County are down 2.5% but most of the sales in that area are for lower priced homes, many of which are in the foreclosed or short sale category. The average sales price is $172,857 but the median price of all sales in Weld County is just $150,000 compared to $200,000 in Loveland and $205,000 in Fort Collins.

As for the near future, showing activity picks up in February and March and peaks over the next ninety days. Closed sales in the second quarter typically total over one third of the year’s activity and normally 75% of the year’s business will be written by June / July and closed by the end of August. We’ve got a lot of work to do and a lot of homes to sell so let’s get started!

Every two years, the City of Fort Collins surveys residents to find out how they feel about their community and their City services. The results of the 2008 Citizen Survey are now available and we had an opportunity to review the report with Kelly DiMartino, Communications and Public Involvement Director for the City of Fort Collins.

Overall, Fort Collins residents are happy with their quality of life, our community and the services provided by the City. In many cases, Fort Collins rates higher than jurisdictions across the nation and the Front Range. There are also opportunities for improvement.

Here are a few highlights:

- When asked to rate Fort Collins, “overall, as a place to live,” 94% of residents rated it as good or very good – above both national and Front Range benchmarks – and an improvement over the 84% rating in the 2006 report. 90% rated “the quality of life” as good or very good, 90% said it was a good place to raise children and 80% said it was a good place to retire.

- In general, the eighteen categories of “Quality of Life and Community Ratings” improved from previous surveys.

- Almost all residents (97%) reported feeling “always safe” or “usually safe” in their neighborhood during the day – higher than national and Front Range benchmarks.

- Ratings for the availability of affordable quality housing are improving, with 31% of residents rating it as good or very good, up from 14% in 2006. This is better than both national and Front Range benchmarks.

- In the “Ratings of the Environment’ category 91% rated the “community’s visual attraction” as good or very good and 90% rated the “overall quality of the environment” as good or very good, both above the national and Front Range benchmarks.

- Transportation ratings show “ease of traveling by bicycle” rated good or very good by 81% and 63% said we have a “walkable city”. Traffic congestion continues to be an area of concern, although ease of driving improved in 2008, with 43% rating it as good or very good as compared to 32% in 2006. Residents living in the southeast quadrant of the city gave higher ratings to the ease of driving than did residents living in other areas of the city.

- The ratings of “Parks, Recreational and Cultural Programs and Facilities” were generally very high and ranked above the national comparison. Recreation trails were ranked good or very good by 95%, natural areas, open space and parks were at 93%, and most other areas surveyed were rated at above 80%. These rankings have also improved considerably over previous reports.

- The overall support of businesses in Fort Collins was given ratings higher than the national benchmark but the “overall economic health” was given just a 42% good / very good rating and the “overall jobs growth” in the city received just a 25% rating, lower than the national and Front Range benchmarks.

- Just over half of respondents (54%) rated the overall direction the City is taking as good or very good.

- The job the City does in informing citizens and welcoming citizen involvement improved from 2006, but remains below the Front Range benchmark.

- The City’s website, fcgov.com, is used by 72% of respondents, up from 50% in 2006.

- Residents were asked how much effort the City should put towards these areas: economy, environment, neighborhoods, safety, cultural, recreation and educational opportunities, transportation and general government. Residents want the City to maintain the same effort that is currently expended in all areas, except the economy and transportation. Residents want to see additional efforts in those two areas.

We would like to thank Kelly for her assistance in reviewing this data. The full report, as well as the results of previous surveys, is available online at fcgov.com/citizensurvey.

There are three main sources we use to track the national real estate market: The National Association of Realtors (NAR), The Federal Housing Finance Agency (FHFA) which used to be called the Office of Federal Housing Enterprise Oversight (OFHEO) and the S&P Case-Shiller Home Price Index. In addition, the U. S. Census Bureau tracks sales of new homes on a monthly basis. There is a considerable lag time in getting this information to the public and each of these services use different methodology but the recent news shows that the national market is in pretty bad shape with demand and pricing at very low levels.

The FHFA just reported their take on the fourth quarter of 2008 and their index was down 8.2% compared to the fourth quarter of 2007. The good news is that the monthly house price index actually increased a very slim 0.1% from November to December. The other good news is that Colorado continues to climb the ladder moving up to seventeenth spot in the country with a one year decrease of 2.6% and the Fort Collins-Loveland Metropolitan Statistical Area is now #91 in the country with a one year price decline of 0.09%. A year ago we were #145 out of the 292 MSA and have improved each quarter to the current level where we have now cracked the top third.

The Case-Shiller index only tracks the top twenty metropolitan areas and they reported that their home price index was down 18.5% for 2008 compared to 2007 but again, the good news was that Denver was the national leader with just a 4% price drop. They also reported on the change in home values since January 2000 and the twenty city composite was an increase of 50.7% with Denver ranked seventh with an increase of 25.8%. We checked our local market figures against this and our average selling price increased 28.1% in this same period.

NAR reported that the national median price for existing home sales in January was down 14.8% from a year earlier. They also reported that sales are down 8.6% from a year ago and that the total housing inventory has continued to decline and is now at the lowest level in two years. Lawrence Yun, NAR chief economist said that “Distressed sales activity appears to be leveling off, although there are wide differences locally. For example, close to 80% of all sales in Santa Ana, CA. are either foreclosed properties or short sales but these account for less than 20% in the Chicago region.” NAR estimates that about a quarter of all inventory is listed as being distressed – foreclosed or requiring a lender-mediated short sale – but that these properties comprised about 45% of all sales in January. In our local market, lender owned and short sale properties comprised 17% of the total sales in 2008.

New home sales plunged even lower than expected in January dropping 10.2% compared to December and are now 48.2% lower on an adjusted annual basis. The median price for new home sales is still dropping, down 9.9% in January although builder confidence which has tanked over the last year seems to be on the rise.

NAR also tracks pending home sales which is an indicator of future closed sales activity and that index keeps dropping. Contracts signed in January were down 7.7% from December and the index is now at its lowest level since tracking began in 2001. The only good news is that the weak housing market has improved affordability which is at a record high. The Housing Affordability Index uses home prices, mortgage interest rates and family income to predict home buying power. “Conditions have been aligning very favorably for home buyers with the exception of consumer confidence,” Yun says. “But I am hopeful that sales will turn around by late spring and early summer because history suggests that home sales can rise even in times of job losses when housing affordability rises”. Let’s hope so!