Peoria Home Prices Up

Mixed conditions around the country according to national 2008 figures. According to National Association of REALTORS' (NAR) report, the median existing single-family home price in the Midwest declined 0.9 percent to $161,500 in the second quarter from the same period in 2007. "The strongest metro price increases in the Midwest were in the Decatur, Ill., area, where the median price of $94,200 was 6.0 percent higher than a year ago, and Des Moines, Iowa, at $156,600, also up 6.0 percent, followed by Peoria, Ill."

Good News for First-Time Home Buyers!

As part of the “Housing and Economic Recovery Act of 2008” that was recently signed into law, Congress has created a new, temporary federal income tax credit to provide an incentive for first-time homebuyers. This is good news! The highlights of this federal tax credit are as follows:

• The amount of the federal tax credit is for 10% of the cost of the home, up to a maximum credit of $7,500. In essence, this is an interest-free loan that enables consumers to receive a tax credit on a dollar-for-dollar basis on their personal income tax return in the calendar year following the year of closing on their home. They begin paying the tax credit back the year after that and make equal installments during the next 15 years. If the homeowner sells the home at any point during the 15-year payback period, then the remaining amount is recaptured, unless they sell the home at a loss, at which point the balance is forgiven.
  * e.g., If a home costs $65,000, the allowable credit would be $6,500. If a home costs $120,000, then the allowable credit would be $7,500.
• Eligibility is for first-time homebuyers only. In this case, a first-time homebuyer is defined as an individual who has not owned a primary home at any time during the past three years, but who may have done so previously. Although certain income limits do apply, the amount of the credit is the same for all taxpayers, married or single.
• An individual whose Form 1040 filing status is single (or head of household) are eligible for the tax credit if their income is no more than $75,000. Individuals who file a joint return may have no more than $150,000 in income.
• Individuals with incomes between $75,001 and 94,999 (single) or $150,001 and $169,999 (joint returns) are eligible for a partial tax credit.
• Individuals with incomes greater than $95,000 (single) or $170,000 (joint return) are not eligible for this tax credit.
• The federal income credit can be claimed on one’s individual or joint tax return for the purchase of any single-family home between April 9, 2008 through July 1, 2009. Individuals should consult a professional tax advisor for exact tax calculations.
  * e.g., If an individual’s actual tax liability was $5,000, then after the tax credit is applied the purchaser would receive a total refund of $2,500. The refundable amount is the difference between the $7,500 tax credit and the amount of one’s tax liability.
  * e.g., If an individual’s actual tax refund was $2,000, then after the tax credit is applied the purchaser would receive a total refund of $9,500.
• This tax credit is required to be repaid without interest in equal installments of 6.67% of the total credit each year for 15 years beginning the year after the tax credit is claimed.
  * e.g., If a homebuyer claims the $7,500 credit in 2009 on their federal income tax return for a closing that occurred in 2008, then the credit is received in 2009, so repayment begins in 2010 with an annual repayment amount of approximately $500 a year.

The National Association of Realtors® has prepared a Quick Reference chart and Frequently Asked Questions document for your reference. The same links have been posted on coldwellbanker.com.

Keep in mind that this tax credit is retroactive. It impacts recent first-time buyers who either closed on or after April 9, 2008 or are currently under contract to close in the near future. This will be a valuable service, a nice surprise and a terrific opportunity to get buyer referrals.

“Do you know anyone else who may be thinking of buying and may be eligible to take advantage of this tax credit?”

“Do you know anyone who is providing financial assistance to a first-time homebuyer, perhaps their parents, grandparents, aunt or uncle, who may inform them of this tax credit?”