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April New Homes Sales Jump To 504K From 439K On Scramble To Catch Last Days Of Homebuyer Tax Subsidy
Earlier this week, existing home sales surged, and now new home sales follow through as homebuyers take advantage of the last month to offer a homebuyer tax credit. The April number was 15% higher than the revised March 439K, and soundly beat expectations of 425K units. Alas, as with every other forward push contraption the government has come up with, this only means that May and future home sales, will once again revert to the trendline as the tax credit has now expired (for now). Compare the recent spike in the chart below to that observed in the month Cash for Clunkers ran out: the 1:1 correlation is unmistakable.
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I am truly shocked by this news.
What a pitfall. I feel sorry for anyone who got roped into it or felt that this 8k was a good deal. Say hello to the future foreclosures of America.
Exactly...I mean you are buying a house to take advantage of a 8k credit when you damn well know that demand will teeter off once the credit is not extended...Kinda like whats going in in Canada with the HST which is suppose to take into effect in July 1st. People grabbing to buy before that date. Makes no sense but I guess nothing does nowadays
it depends on the buyer situation. I know most people here are old cronies that only buy homes as assets where the price is everything.
But to people who are actually looking for a home to live in, and they have a somewhat reliable job security, then why not grab the 8K? Most home prices have already dropped substantially so even if it falls more they are have a relatively good entry point with 8K for a headstart.
Sure most people like that aren't reading this blog, but at least one is. Me. I grabbed a home a year ago last April, and was able to claim that 8K the next week before the tax return deadline.. not a bad quick gain right? I used half to buy PMs and the other to pay off high % debt...
"why not grab the 8K?"
Because there's nothing to "grab", since it's a tax credit. I would feel differently if a government representative actually handed you $8k the moment the papers were signed. The way things are, you have to meet all the conditions of the tax credit, fill out the paperwork correctly, fill out the tax forms correctly, submit the required paperwork correctly, and then wait for a year or so (depending on when the sale occurred) for the tax forms to be processed and accepted by the government. If they don't accept your claims, you either give up or spend months arguing with the IRS. Also, you need to make enough money for a tax credit to even have an effect (so if you buy a house with savings, no rebate for you).
On top of this, the existence of an $8k tax credit probably just meant every seller raised the asking price by $8k. Net result is you pay $8k more for a house and may or may not receive an $8k rebate.
I am one that bought a house last month to live in. I sold in 2005 and have rented ever since. Now he home prices have dropped and a home that fits my needs and price range came on the market. I locked in at 4.87% for 30 yrs.
The $8000 was only a factor in getting the contract in before April 30. It played no other role.
The main reason I bought was the four car garage and a view of my favorite surf sites on the north shore of Maui from my bedroom window
Wow, awesome news. Suck natural demand for homes right out of the rest of 2010. This plan was brilliant.
classic Tyler wit.
what a nice little w that chart has made. Too bad there isnt a letter that looks like:
\
W\
\
Coming up: the Yellow Sign-shaped recovery.
These sales weren't fueled by the tax credit but instead by all those wives who demanded their husbands buy a house because they thought they were getting 8k for "free."
One of the classic unintentionally destructive commercials of all time:
http://www.youtube.com/watch?v=Ubsd-tWYmZw
I love it when the wife waggles her head side-to-side and says "What???"
Hard to believe that people are making six-figure financial decisions based on "free money" representing 5% or less of the total purchase price. A similar offer (everything is 5% off!) in a soft-lines or hard-lines retailer would generate zero incremental sales.
Like low mortgage rates, the $8,000 tax credit is simply an incentive to overpay.
One should never be surprised when the fire flares after the can of lighter fluid is poured on the open flame.
Just watch out when the flame starts the follow the lighter fluid stream back to the can in your hand. I've seen it happen to an (idiot) friend and the parallels to the Fed and Treasury are unmistakable.
Boom
That and more.
At some point the brain freezes and the person holding the can runs around and eventually into the house trailing a burning stream of highly flammable fluid. That barbecue cost him around $26,000 in damages to his house and patio plus a few months in the burn unit. And he was repeatedly warned by everyone around him not to do exactly what he did.
Sounds very similar to our international cookout, already in progress. Marshmallows anyone?
Wow, what a passed life config to need to get into.
matches up nicely with the new home mortgage apps which have fallen off a cliff
"U.S. mortgage applications to refinance home loans jumped to a seven-month high last week as rates neared record lows, but purchase demand remained stuck at a 13-year low." - Reuters 5/26/2010
"US New Home Sales at 2-Year High in April"- Reuters 5/26/2010
Can I get a big WTF??????
Existing home sales came out Monday. You should take them into account as well.
Any guesses as to how long it will take for that $8K in taxpayer-funded equity to disappear? What a huge price for such a small blip on the chart.
Way better off if you had waited a couple of weeks. Now prices are lower and mortgage rates are in your favor. If you bought with the credit you effectively paid much, much more than you would today.
Read the following here: http://truthingold.blogspot.com/2010/05/this-is-not-good-sign.html#links
"On a related note, some idiot disguised as a financial expert on CNN Headline News, Clark Howard, was on today gleeflully explaining to viewers that the housing market was going lower now that the housing tax credit expired and it was great time to buy because prices were dropping by as much as 10% in some areas, as people who weren't able to sell to tax credit buyers now look just to sell before they default. How would you like to be one of those poor slobs who was aggressively cajoled into buying some beater of a home by his broker in order to take advantage of the tax credit and "good prices," and then turn on CNN to hear that now your purchase closed, the value of your home has probably already dropped by about 10% - which factors in 8.5% for the tax credit plus another 1.5% because of the inventory that is now flooding the market. Many homes around my area in Denver are now sporting "price reduced" signs on top the realtor sign in front.
The housing market is on the edge of another cliff dive. The policy makers have completely misjudged the effectiveness of the tax credit program as a means of "jump starting" the housing market. Expect the Fed to roll out another massive money printing program, using Europe's woes as the cover excuse. But we all know by now that the problems in Europe pale compared to the brewing financial/economic disaster in this country. "
There's no need to fear, Uncle Stimulant Man is here.
"He is here to save the day!"
"Mighty Stimulus will join the fight."
"In the home and in the car."
"Their prices are as high as a kite."
sung to the Mighty Mouse theme, sort of. /lol/
DnD, I noticed the same thing happening here in one of the "hotter markets" in D'never-Platte Park. The spec artists just flipped their motel 6 style renovation across the alley, after the greedy relations moved my 90 year friend Phyllis outa there and dumped the place for $220 K. The specs swooped in, put in maybe $50 K and put it on the market for $399 K!! To my astonishment it sold in two days to a young couple w/kid! Grandpa Warbucks supplied the huge down and then some. Money to burn apparently. Like with so many other things economic they must be living on another planet. Meanwhile the short sales here are coming fast and heavy.
Umm , in any other market if volume goes up and prices go down... isn't that panic selling more than panic buying?
So are people accepting lower bids in the fear that they may not be able to sell at all in the next months... Just a thought...
http://www.marketwatch.com/story/delays-denials-hit-home-buyer-tax-credi...
LOS ANGELES (MarketWatch) -- While TaxMama is being deluged with calls and emails from taxpayers wondering where their refund went, the IRS has been busy processing over 1.8 million claims for home-buyer tax credits, according to IRS data through February.
About $12.6 billion has been pumped back into the economy as taxpayer refunds, said Bruce Friedland, an IRS spokesman.
Let's get this processing volume into perspective. IRS started processing claims for the first-time home-buyer credit when taxpayers started filing their 2008 tax returns in early 2009. That means IRS employees have processed about 150,000 claims per month.
It's a monumental task. Since discovering millions of dollars of fraudulent claims, the IRS has been reviewing a substantial portion of the claims instead of letting the computer process and pay.
That's where the delays start.
Steve B. said he feels he's being lied to about his tax-credit claim. He filed for his home- buyer credit in January, certain that everything the IRS requested was attached. It's now been over four months and IRS simply tells him "it is in the errors department" and they have no further information. Steve has tried calling the IRS "a million times," he said. He's even tried the Taxpayers Advocate Service, but they tell him they don't deal with this issue.
Steve isn't alone. Delays seem to run 25 weeks and more. When asked about the current expected processing time for the Form 5405 for claiming the tax credit, Friedland is as unable to get a definitive answer as any other taxpayer.
Rumors take rootWhen there are problems, rumors start. Steve B. said he heard thousands of these returns have been outsourced to third-party handlers to process the claims. The IRS's Friedland said no one outside the IRS is processing your tax returns. Relax.
There are rumors that the IRS is rejecting claims from people who have ITINs, the Individual Taxpayer Identification Numbers issued to aliens who do not qualify for real Social Security numbers. This rumor happens to be true. There's no credit for non-resident aliens.
Here's an excerpt from the Housing and Economic Recovery Act of 2008: "No credit under subsection (a) shall be allowed to any taxpayer for any taxable year with respect to the purchase of a residence if (3) the taxpayer is a nonresident alien."
The question is, are you automatically a non-resident alien because you have an ITIN? This is the kind of question stirring up strong emotions in Arizona and across the country these days, isn't it?
Without getting political, let's look at the law. There's a good possibility that many of these ITIN holders getting rejected should ask to have their claims re-examined. They may be resident aliens. The Recovery Act did not exclude resident aliens from the credit. The law was specific about nonresident aliens.
What is a resident alien? According to the IRS, you are considered a resident alien if you met one of the following two tests for the calendar year.
One, you have a green card. Two, you meet the "substantial presence test" -- meaning you have been physically present in the U.S. on at least 31 days during the current year, and 183 days during the three-year period that includes the current year and the two years immediately before. See Tax Topic 851 on the IRS site.
If you can prove that you have been living in this country all that time, and in all other ways you qualify, you should be entitled to the home-buyer tax credits.
Have unit number? Hit the roadDid you get a rejection because your new home has an apartment number? How odd is that? How many ways can you live in an owned residence in this country with a unit number? Let me count the ways:
Cooperative apartments
Duplexes, triplexes, four-plexes and such
Mobile or manufactured home parks
Boat slips (yes, boats qualify)
No doubt, I've missed some. Solution: If you get a rejection because you filled in the unit number box on your tax return or an amended return, respond immediately with an explanation and pile on the proof that you really did buy a personal residence.
More bizarre IRS rejectionsHere are some of the odd reasons the IRS has used to reject claims:
The timeshare rejection. A taxpayer had a 1098 form (mortgage interest paid) from Hilton Resorts. IRS rejected the home-buyer tax credit claim, saying since they owned a home, they can't have the credit. Yup - two weeks in a timeshare qualifies as a principal residence! You shouldn't even have to defend this one.
Solution: Dig up proof that it's a timeshare and you can't possibly live there more than a week or two. You don't get disqualified for owning vacation property or even rental units, just a personal residence.
You didn't submit proof of the purchase. The IRS sends back the entire tax return with the rejection letter. You open it up, and every single document that IRS requested is right there in the package they sent back to you. You scratch your head.
Solution: Send all the forms back to IRS with a cover letter listing all the attachments and spell out exactly what each document is, and how it provides proof that you are either a first-time home buyer, or have owned a home for five years out of the last eight years.
You didn't respond in time. This doesn't sound bizarre, right? Here's why it's bizarre. When taxpayers filed amended returns, they put their new address on the Form 1040X. Naturally, since you just moved to a new home, you would do that, right? Well, in some instances, the IRS has been sending all the correspondence to the old address, ignoring the address on the Form 1040X and on all the documents that provide proof of the new home purchase. Naturally, by the time the mail gets forwarded, the deadline to respond has passed.
Solution: Send IRS a response requesting that they reopen your claim because of their error. Enclose a copy of your original Form 1040X showing the correct address on it. Enclose a copy of the envelope that contained the correspondence -- sent to the wrong address. While you're at it, just for good measure, include a copy of Form 8822, change of address. See the form on IRS site.
Are you starting to see a pattern here? The IRS staff is under so much pressure to process files and close cases, they seem to be barely looking at the documents they receive.
An open note to the IRSThis is no way to run an airline -- or even tax administration. Are these taxpayers really crooks, trying to cash in on the home-buyer tax credit gold rush? Or are they legitimate new or first-time home buyers?
Perhaps the paperwork does not contain a HUD-1 statement. But only real estate is sold using that document. Mobile homes, manufactured homes and watercraft are sold using other purchase forms.
Just because there's a Form 1098 on someone's transcript doesn't mean the buyer should be rejected. Your own FAQs define that a home buyer is entitled to any other kind of real estate they want, as long as it's not a personal residence. Consider looking at the property address related to the Form 1098. As in the case of the Hilton Resorts timeshare, clearly that property address is not the same as the one on their W-2s, 1099s, or prior tax returns.
It's not over yet!As of April 30, the home-buying frenzy may be over for you and me, but it's not entirely over yet. Anyone who was in escrow, or initiated a home purchase before April 30 is entitled to complete that purchase by June 30.
The deadline to initiate a purchase is April 30, 2011 for certain members of the armed forces and government employees who have served outside of the U.S. for at least 90 days during the period beginning after Dec. 31, 2008, and ending before May 1, 2010. Go here for more information.
Meanwhile, hurry up and wait.
If you're still waiting for a home-buyer tax-credit refund, you may be in for a long wait. Call the IRS every week or two until you're sure someone has received your file. (Some have been getting lost.) Once you know they have your file, make sure they have the correct address for correspondence. In fact, consider sending in a Form 8822, change of address, just to ensure it's in the system. When you get any correspondence, other than a check, respond to it immediately.
Eva Rosenberg, an enrolled agent, is the publisher of TaxMama.com . She is the author of several books and e-books , including "Small Business Taxes Made Easy," and she teaches a course for tax professionals at IRSExams.com.
Yes there will be another homebuyer tax credit, and another cash for clunkers. They will do them until a full collapse.
How long till a full and admitted collapse? 2 months? 2 years? Does it matter?
Well, I never got sucked into the 8K tax credit. I sold in early 2008 and have been in a rental since, now houses will be aloowed to freefall another 20% and 8K will be chump change to the 40K I will save. I have laughed at all the people that say I am throwing money away renting, as house prices have dropped a 100K already, boy have I been wasting money,LOL.