Strong First Time Home Sales Make This a Move Up Market!

Over the course of the last year, I have noticed that my personal sales history shows that smaller homes are selling much faster than larger homes.  I have seen a number of 3 bedroom, 2 bath homes sell in less than 30 days, even in this austere market.  And these homes are selling for strong prices, several having appreciated in the last year.  One of the small homes that I sold in 2009 set the mark for the highest price per square foot in its Plano neighborhood.

Across the nation, the strength of smaller size homes seems to be consistent.  A USA Today article published this morning addresses this topic directly.  The article quotes statistics from the National Association of Home Builders noting that this trend has not been overlooked by those who bring new product to the market.  The median square footage of homes has dropped about 9%, from a peak of 2300 sq ft in the third quarter of 2006 to 2100 sq ft in the same period of 2009.

I believe there are a couple of factors that cause this trend to occur.  First, the general strength of the economy has everyone scrutinizing expenditures, and people are beginning to realize that they can survive on less.  The thought pattern goes something like this “We’d love to have the media room, but do I really need it?  Perhaps now is not the time – we’ll get that in the next house.”  Second, the strongest segment of the market is in first time home buyers.  People are realizing that given price levels, interest rates and tax incentives, it make sense to buy a home rather than rent for those who can qualify for a mortgage.  First time home buyers have not built up equity over the years and usually start by purchasing smaller homes.  The combination of these occurrences leads to smaller homes outperforming larger homes in the current market.

So what’s the moral of the story?  If you have been in your first home for the last several years, and are thinking that perhaps now is the time to move up, you couldn’t be more right.  Your smaller starter home will yield the best price in the market, and the home that you purchase will likely be discounted from its level of the past couple of years.  The market is taking shape to make now the best time to step into a larger home.

A $2 Million Pizza??

The Plano City Council is set to vote Monday on a $2 million economic incentive package to woo Pizza Hut from its current Addison headquarters location to a new facility to be developed in Plano.  The new development would be part of the Legacy business park in West Plano.

Pizza Hut Logo

Time for a move?

In my opinion, this is a great play by the city of Plano.  Plano has done an exceptional job of attracting corporate headquarters to its fair city, and this is another shining opportunity.  The Pizza Hut relocation comes complete with approximately 450 high paying jobs and will provide a boost to the Plano economy.

Even though the relocation distance from their current location on the Dallas North Tollway in Addison, the move to Plano should serve as a nice stimulus to property values in West Plano.  The additional jobs will create additional residential housing demand in the neighborhoods in close proximity to the Legacy Business Park.  The move will not happen immediately.  The current lease on the Pizza Hut headquarters expires in 2010, and Pizza Hut will have to ready its new facility before making the move.

Kudos to the city of Plano who in the past year has attracted approximately 20 companies and over 4,500 new jobs in the midst of the largest economic downturn our country has faced in many decades.  No recession in Plano – keep gowing!!

For more information on this story, please see the Dallas Business Journal article – Pizza Hut Incentives on Plano’s Agenda.

Something for the Rest of Us!! – Home Buyer Tax Credit Update

Did you notice the lack of the words “First Time” in the title.  Here’s a little something for those of us who already own a piece of the American dream.  If last year’s tax credit was enough to get first time buyers into the market, let’s hope that this stimulates things even more.

Congress and President Obama have seen fit to extend the Home Buyer Tax Credit into 2010, and they have significantly increased the scope of the incentive.  It is now available to anyone homeowner who meets certain income guidelines and sells their home between Nov 7, 2009 and May 31, 2010.  And the definition of sell is now translated as enter into a contract to sell by May 31, 2010 and close by Jul 31, 2010.

Homebuyer Tax Credit — Revised November 2009

FEATURE Jan. 1 – Nov. 30, 2009
Rules As Enacted
February 2009
Nov. 7 – Apr. 30, 2010
Rules As Enacted
November 2009
First-time Buyer – Amount of Credit $8,000 ($4,000 married filing separate) $8,000 ($4,000 married filing separate)
First-time Buyer – Definition for Eligibility May not have had an interest in a principal residence for 3 years prior to purchase Same
Current Homeowner – Amount of Credit No Provision $6,500 ($3,250 married filing separate)
Effective Date – Current Owner No Provision November 7, 2009
Current Homeowner – Definition for Eligibility No Provision Must have used the home sold or being sold as a principal residence consecutively for 5 of the previous 8 years
Termination of Credit Purchases after November 30, 2009.
(Becomes April 30, 2010 on November 7, 2009)
Purchases after April 30, 2010
Binding Contract Rule None So long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until July 1, 2010 to close
Income Limits (Note: Increased income limits are effective as of November 7, 2009) $75,000 – single
$150,000 – married
Additional $20,000 phase out
$125,000 – single
$225,000 – married
Additional $20,000 phase out
Limitation on Cost of Purchased Home None $800,000
November 7, 2009
Purchase by a Dependent No Provision Ineligible
November 7, 2009
Anti-fraud Rule None Purchaser must attach documentation of purchase to tax return

Source: National Association of Realtors

 

The tax credit to existing homeowners is up to $6,500, so if you were thinking about upgrading the homestead, now is definitely the time to act. Low interest rates, great buys available in the market, and a tax credit to boot – it’s the “perfect storm” for making the move to the larger house, or the incentive to finally downsize into the cozy home, depending on your vantage point of life.

In upcoming posts, I’ll examine some financial strategies for accessing this tax credit during the course of your transaction. Stay tuned…

Did the First Time Home Buyer Tax Credit Work?

As 2009 draws to a close, I am wondering how well the first time home buyer tax credit worked this year. Rather than simply speculate, I will look to market numbers to answer the question. According to the National Association of Realtors (NAR), first time home buyers accounted for 47 percent of all real estate transactions that were completed thus far in 2009. That figure represents an all time high percentage of first time home buyers, eclipsing the mark of 41 percent that was seen last year and the previous record high of 44 percent in 1991.

Money Picture
Up to $8000 coming back to First Time Home Buyers

Paul Bishop, NAR Vice President of Research notes, “It’s interesting to note the last cyclical peak of first-time home buyers was during the last noteworthy economic downturn, with first-time buyers starting the chain reaction that led the nation out of recession.” Well, I’m all for pulling out of the recession, so I sure hope that an upward trend of home sales continues in 2010.

In addition to the tax credit received by first time home buyers in 2009, there were additional factors that contributed to the increase in the number of first time home buyers. Interest rates were phenomenally low throughout the year. I would hope that they remain low through the next year, but prolonged periods of interest rates this low have not often been observed in our economic history. Additionally, home prices in many areas fell during the past year. So, bottom line, there was a product “on sale” with very cheap financing that someone (Uncle Sam) was paying the consumer to buy. Sounds like a good recipe for success. To those first time home buyers who purchased a home in 2009, congratulations! To find out if, and how much, tax credit you received, click here.