Local Realtors and home builders believe a $7,500 tax credit available to first-time homebuyers is the one prong of President Bush’s Housing and Economic Recovery Act of 2008 that could provide the biggest stimulus to Cincinnati’s housing market.
The federal legislation, approved Aug. 6, includes a series of measures to stimulate home sales, prevent foreclosures and neutralize the weak economy’s effect on the housing market.
First-time buyers, or those that haven’t owned a home in three years or longer, may qualify for up to a $7,500 tax credit on their 2008 income taxes. They’ll have to pay the credit back over a 15-year term, with no interest.
But the key is in raising the confidence of buyers who might have doubted their ability to qualify for a loan without the attractive zero-percent-down offers of the last few years, said Karen Schlosser, president of the Cincinnati Area Board of Realtors and sales manager at Re/Max Unlimited. The tax credit will be retroactive back to April.
Industry groups, brokerage firms and home builders are desperate to spread news like this to the Cincinnati market, said Dan Hendricks, president of the Home Builders Association of Greater Cincinnati. Building permits have dropped from 7,000 per year to 3,600, he said.
Inventory levels have spiked. A Cincinnati home, on average, sits on the market 8.5 months, according to the Cincinnati Area Board of Realtors’ June 2008 report.
In a stable market, homes sell within five or six months, said Schlosser.
“We need first-time buyers to come in and take a layer of housing out so those people selling can move up,” she said.
Schlosser added that buyers purchasing a home for the first time represent 40 percent of all sales.
A new marketing tool
Couple the tax credit with measures to encourage use of Federal Housing Administration loans, and builders have a new tool to use in marketing their homes, said Terry Sievers, Midwest region president for Drees Homes.
The legislation ups the maximum loan government-sponsored enterprises Fannie Mae, Freddie Mac and the Federal Home Loan Banks can provide to $625,500.
It also increases the maximum FHA-insured loan to 115 percent of an area’s median home price to a maximum of $625,500 with a minimum down payment of 3.5 percent, up from 3 percent.
“They are appealing to a lot of buyers that would not have used FHA financing a couple years ago,” Sievers said. “In the ’70s, it was all about financing. People would walk in to buy a home and the first thing you’d discuss is what the interest rate and payments would be, not the features of the home. In many cases, it’s a return to that.”
Schlosser’s Re/Max Unlimited group will host an information session for its Realtors next week to provide tips on marketing the legislation to past, present and potential clients.
They’ll also discuss Ohio Housing Finance Agency measures, like low interest loans for first-time buyers in Ohio and the Ohio Heroes Program, in which full-time police and fire officers, paramedics, health care workers and teachers can qualify for a rate that is one quarter lower through the agency.
“We need people to be confident to come into the market and buy a home,” Schlosser said.
“Getting information out to as many people as we can is so important.”
Group Realtors is contacting its clients who have purchased homes over the past few months to encourage them to pursue the credit and spread the word to others, said the firm’s owner Marilou Butcher Roth.
Fischer Homes hopes the act stimulates sales in its Maple Street Homes division, in which 50 percent of buyers are purchasing for the first time.
“Do I think that it’s the miracle cure for the housing industry? Absolutely not. But it’s a lot about what’s going in people’s ears versus the facts,” said Fischer Director of Marketing Brian Fannin.
Fischer will advertise parts of the bill through direct mail and e-mail blasts to customers.
“We’re just trying to say, ‘you owe it to yourself to look at the window of opportunity,’” Fannin said.
