In late February, President Obama signed into law a $787 billion stimulus plan that, among other things, offers an $8,000 tax credit to first-time homebuyers. The credit, which does not need to be repaid, applies to people who have not owned a principal residence for three years prior to purchasing their first home, and stipulates that the home must be purchased on or after Jan. 1 and before Dec. 1, 2009. The exact amount of the tax credit homebuyers will receive is equal to 10 percent of their home’s purchase price, up to a maximum of $8,000.
At least two local realtors see the tax credit as a positive thing. Michael Saunders of Michael Saunders & Company is confident that it will have a positive impact on the local market, adding that a “huge percentage” of her company’s sales this year have been to buyers purchasing homes in the $300,000-and-under range. She notes that of 683 pending sales in the Sarasota MLS in January, 485—a whopping 71 percent—were priced at under $300,000. This, she says, is indicative of a flurry of activity among first-time homebuyers who are not burdened with having to sell one home before buying another and who, if the right opportunity comes their way, can apply the tax credit to their purchase to “sweeten the deal.”
Polly Gaar, vice president of Bradenton’s Wagner Realty, says that anything that can be done right now will be helpful, and that Wagner is seeing an increase in activity this year already. “People are out at open houses and looking—especially in the $200,000 range,” she says. “Prices are favorable and interest rates are still historically low. Everything seems to be lining up nicely. It is a nice incentive, and every little bit helps.”
But Jack McCabe, president of Deerfield Beach-based McCabe Research & Consulting, says that realtors’ enthusiasm may be a little premature. “If you’re looking at buying a home that’s $120,000 or less, then it’s a good incentive,” he says. “But even though Sarasota is seeing some of the largest price declines in any market in the state of Florida, prices are still high and $8,000 isn’t much of a down payment.” McCabe also points out that, for people looking to purchase condominiums, lenders like Fannie Mae have placed a number of new restrictions on making loans in condo buildings—“things like, if 15 percent of the unit owners are late in making [homeowners’ association] payments, [the lender] won’t make a loan in that building,” he explains.
McCabe also notes that, like everyone else, first-time homebuyers are experiencing a lot of uncertainty about the future right now. “What if prices continue to decline another 10 percent or 15 percent this year? How big is the tax credit going to be?” he asks. “And what if prices continue to bounce along the bottom through 2012, as they will in my opinion? The truth is, any incentive is welcome—but how strong an incentive this is for us in Florida remains to be seen.”