MORRIS PLAINS, NJ-Higher financial incentives can easily turn more onlookers into first-time homebuyers, according to a recent survey.
Up to 84% of over 500 visitors to Weichert Realtors' website said they would be highly motivated to purchase a home if they could receive a tax credit of $15,000, compared to only 46% who would be highly motivated if they received a $8,000 tax credit.
The American Recovery and Reinvestment Act of 2009 offers first-time homebuyers a tax credit of up to $8,000 toward the purchase costs of a FHA-insured home, accessible after filing their tax returns with the IRS.
"The current tax credit for first-time homebuyers is generating some additional sales," says James M. Weichert, founder and president of the real estate and financial services company. "As currently constructed it isn't enough to jumpstart the market and stimulate the national economy."
He agrees with Sens. Johnny Isakson, R-Ga., and Chris Dodd, D-Conn., who recently introduced a bill that would increase a first-time buyer's tax credit to $15,000 arguing that more efforts are needed to attract new homebuyers.
According to Weichert data, the current legislation has helped stimulate the market this year.
If low-income housing investment and first-time homebuyer tax credits are recognized by many industry insiders as the most effective affordable housing financing resources still available to the marketplace, the question is: How big is enough to bring in new buyers and help improve home values in distressed neighborhoods?
"Perhaps the greatest stimulus to the housing sector would be realized through the offering of a tax credit to existing homeowners as well," Mr. Weichert says. "Four out of five current homeowners [surveyed] said they would be somewhat to highly motivated to buy if they received a tax credit of $8,000 for purchasing a home. If the tax credit was increased to $15,000 the number of existing homeowners motivated to buy would grow to 94%."
The American Recovery and Reinvestment Act of 2009 allows homebuyers using FHA-approved lenders to apply the tax credit to their downpayment in excess of 3.5% of appraised value or their closing costs, which can help achieve a lower interest rate.
Buyers financing through state housing finance agencies and certain nonprofits will be able to use the tax credit for their downpayments via secondary financing provided by the HFA or nonprofit.
Plus, FHA allows parents, employers and other governmental entities to contribute towards the downpayment.