This post first appeared in the September edition of Cirios Trends: Getting to the Bottom of the Housing Market

For all you first time homebuyers rushing out to buy a home before the current $8,000 federal tax credit disappears in December, perhaps now is the time to stop, breathe deeply and assess your financial situation and target market before jumping into such a hefty commitment. Besides, if Congress has its way, there is no rush to take advantage of a tax break. Currently, there are at least 3 different proposed bills seeking to extend and/or expand the current first time homebuyer tax credits.

The leading proposal, HR 2801 – the Home Ownership Moves the Economy (HOME) Act of 2009, introduced in June by Howard Coble (R-NC) and co-sponsored by members from both parties, seeks to extend the current tax credit until January 1, 2011. The bill would also expand access to more potential homebuyers. The HOME Act would remove income restrictions (the current credit “phases out” for singles making more than $75,000 and couples making more than $150,000 annually) as well as extend the tax credit to all homebuyers, not just first time buyers.

A prospective home buyer can glean some important insight from the recent tax credit proposals. First, Congress is standing firmly behind its belief that a healthy housing market is key to our nation’s economic recovery and appears committed to propping up the collapsing housing market by extending financial support to a wider swath of potential buyers.

Second, with the high-end real estate market feeling downward pricing pressure, Congress appears ready to extend taxpayer support to the housing market as a whole, rather than to lower-priced homes only.

So what does this mean for a prospective home buyer?

In reality, it should not mean much.

Buying a home is a huge financial obligation, one which has the potential to, if done right,
establish a solid financial foundation for the rest of one’s life.

But with that potential reward comes risk, which many homeowners are discovering only too late. $8,000 is not an insignificant amount of money, but we often counsel our clients: “If you are buying a home to get an $8,000 check, maybe you aren’t buying for the right reasons.”

Consider that if you buy a $400,000 home, a mere 2% decrease in the value of your home wipes out the $8,000 credit you just received. In markets that have declined, 20, 30 or 40% already, another 2% barely even registers.

An important caveat to both buyers looking to capitalize on the current tax credit and those waiting-and-seeing: the HOME Act of 2009 has not been signed into law, and is still early in the House Committee process. The breadth of this proposed tax credit expansion could drastically change before it is signed into law, or even be abandoned altogether.

Those who followed the passage of the present tax credit know that the Senate initially sought to create a $15,000 credit, and several proponents wanted it extended beyond first time buyers.

In other words: Nothing is set in stone, yet. Whether you intend to take advantage of the current tax credit or wait and see what will be available next year, Cirios is here to aid and educate prospective buyers dipping their feet into what should still be considered a “confusing” market.

Sales of new homes dropped in May, surprising analysis who had expected a continued strengthening in US housing market data. According to Bloomberg, transactions fell 0.6% from April, but median prices decreased by just 3.4% from last year. This compares to a much bigger 17% year-over-year decline in existing home prices, as reported yesterday.

Data indicate that prices in the new home market are stabilizing, even as sales remain anemic. This is partly due to the fact that builders, having won reprieves from their lenders and extensions of credit agreements, have been unwilling to further discount prices and offer incentives to buyers. Uncle Sam took care of that, thank you very much, with generous tax rebates to first time buyers of newly constructed homes.

Indeed, upping that figure to $15,000 from $8,000 and doing away with income restrictions is now on the table.

As the government encourages more and more families to jump back into the housing market, it will increasingly seem like a great time to buy. And while some area are showing signs of returning to more healthy market behavior, the vast majority of markets are still trending downward. Opportunities are emerging, to be sure, but only to the savvy and well-informed buyer.

Interested in becoming one of those savvy and well-informed buyers? We are here to help.

The barrage of positive housing data continued yesterday as April Pending Home Sales — which measure contracts signed for new purchases — jumped 6.7% from a month ago. The index, which is viewed as a leading indicator for future sales, was also up 3.2% from this time last year, according to Bloomberg.

Sales continued to be the strongest in regions dominated by foreclosures, as “bargain” prices, low interest rates and first time homebuyer tax incentives encouraged buyers to step back into the market. Lawrence Yun, the National Association of Realtors’ perennially optimistic Chief Economist, said “The market has already bottomed in some areas, but this is an unusual housing cycle with some areas improving rapidly while others languish or decline.”

In other words, the guy who is supposed to know more about the state of the US housing market than anyone else in the country appears confused by the fact that real estate, in fact, is local.

As reported here at Cirios Real Estate for months, home price trends are becoming increasingly localized, as supply/demand fundamentals down to the street levels drive property values. It’s no longer sufficient to say that home prices in X city, or X county, or even X zip code have done Y. Only analysis down to the neighborhood level can give you an accurate picture of where prices are going for an individual house.

And as housing data steadily improves, it is all the more important for buyers to have price trend experts like Cirios on their side.