August 20, 2009 in City

Buy a house, get paid

Market gets boost as tax credit motivates first-time buyers
By The Spokesman-Review
Jesse Tinsley photo

Jared and Meredith Lyda stand in the hall of their new home Tuesday in Coeur d’Alene. Since moving a month ago, they have repainted and put down new floors in the 10-year-old house, improvements they’ll pay for using a federal tax credit for first-time homebuyers.
(Full-size photo)

How it works

The federal tax credit of up to $8,000 for qualified first-time homebuyers is claimed on their federal income tax returns.

The tax credit is refundable, meaning it can be claimed even if you have little or no federal income tax to pay. So if you owe federal income taxes of $2,000 but qualify for the full $8,000 homebuyer tax credit, the government will send you a check for $6,000.

Source: IRS

Jared and Meredith Lyda expect to receive a check from the federal government within the next few weeks.

The $8,000 tax credit should cover the renovations the Coeur d’Alene newlyweds made to their first home, a three-bedroom, two-bathroom rancher they moved into on July 31. The tax credit for first-time homebuyers also allowed the Lydas to buy a slightly bigger, newer home than they expected.

“It’s been fantastic for us, a great opportunity,” said Jared Lyda, who owns a company that makes interior design tiles. The couple paid the asking price, making an offer the day the house went on the market.

“We knew immediately when we walked in the door,” said Meredith Lyda, an assistant manager at Starbucks. “It was a no-brainer.”

They join first-time homebuyers nationwide and in the Spokane-Coeur d’Alene area whose eagerness to get the $8,000 credit is helping drive home sales at the lower end of the market, Realtors say.

“There’s two different markets,” said Bruce Hardie, a broker for Keller Williams Realty in Spokane. “Anything under $200,000, it’s absolutely a seller’s market. Anything over that, it’s a buyer’s market.”

Activity has amped up as the tax credit’s Nov. 30 expiration approaches, Realtors say. Because closing a sale usually takes 45 to 60 days, buyers who hope to take advantage of the tax credit need to find homes soon, real estate professionals said.

“I think you’ll see a rush on it” in the next few weeks, said Chad Oakland, the Realtor with Century 21 Beutler and Associates in Coeur d’Alene who helped the Lydas find their home.

Though interest rates and low prices also are driving sales, Hardie and other Realtors said the tax credit’s impact on the market is undeniable. Compared to June, July is typically flat or down. But July sales this year were up 7 percent in Spokane and 20 percent in Coeur d’Alene. The latest class for first-time homebuyers in Coeur d’Alene attracted 43 people, up from nine in January, said Kim Cooper, spokesman for the Coeur d’Alene Association of Realtors and a real estate broker.

In the Coeur d’Alene area, 68 percent of homes sold in July cost $200,000 or less, compared to last July when 50 percent changed hands in that price range. From May to July in the Spokane area, 66 percent of sales were for less than $200,000, compared to 57 percent during that period in 2008, said Rob Higgins, executive vice president for the Spokane Association of Realtors.

“Normally those numbers run pretty consistent,” Higgins said. “To have a big jump, what’s the reason for it? I think the $8,000 tax credit obviously is an incentive for the first-time homebuyer.”

Cooper said the public is now seeing the impact of the public information campaign that accompanied the tax credit. “We anticipate another increase in activity. Our increase of July over June is atypical,” he said. “To have a 20 percent increase in July over June is an anomaly.”

Buyers are eligible for the tax credit if they haven’t owned a home within the past three years and if they plan to use it as their primary residence. The credit equals 10 percent of the purchase price, up to $8,000, but it also depends on income. A single person who earns $75,000 or less is eligible for the entire credit, with the amount tapering down and phasing out for income of more than $95,000. The limits for couples are $150,000 and $170,000.

Cooper said the tax credit might have created just the incentive some buyers needed. “I had a man in his 70s who thought he might want to buy, and his whole motivation was the tax credit,” he said. “They’ve waited long enough. They’re weary of the past year and the uncertainty in the market. I think generally they’re thinking the worst is over.”

Despite the increase in activity at the lower end of the market, sales are down substantially over the past year. Compared to last year, sales activity is down for the year to date by 14 percent in the Coeur d’Alene area and 20 percent in the Spokane area.

But on both sides of the state line, Realtors are seeing signs of change. Cooper said of the 305 home sales completed in July in the Coeur d’Alene area, the average home sold for 97 percent of the list price. And Spokane County is seeing an uptick in activity, month-by-month, Higgins said.

“I think 2009 will be the low point as far as total sales,” he said.

Hardie, the Keller Williams Realty broker, predicted an additional slowdown in the market if the government does not extend the tax credit.

“It has been the real deal,” he said. “It has really changed things.”

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