It’s official. President Obama has signed a bill that extends the tax credit for first-time homebuyers (FTHBs) into the first half of 2010. This program had been scheduled to expire on November 30, 2009.

In addition to extending the tax credit of up to $8,000 through June 30, 2010, the extension measure also opens up opportunities for others who are not buying a home for the first time.

So Who Gets What?
The program that has existed for FTHBs remains intact with the one exception that more people are now eligible based on an increase in the amount of income someone may now earn.

Additionally, the program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Deadlines
In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

Higher Income Caps in Effect
The amount of income someone can earn and qualify for the full amount of the credit has been increased.

Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible.

Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

Maximum Purchase Price
Qualifying buyers may purchase a property with a maximum sales price of $800,000.

First-Time Homebuyer Tax Credit – Frequently Asked Questions
Here are answers to some commonly asked questions about the tax credit.

What is a tax credit?
A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual’s primary residence.

What is the tax credit for first-time homebuyers (FTHBs)?
An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.

Who is eligible for the FTHB tax credit?
Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible. This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.

As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.

How do I claim the credit?
For those taking advantage of the tax credit in 2009, you may choose to either apply for the credit with your 2009 tax return or you may apply for the credit sooner by filing an amended 2008 tax return with Form 5405 (http://www.irs.gov/pub/irs-pdf/f5405.pdf).

Can you claim the tax credit in advance of purchasing a property?
No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.

Can a taxpayer claim a credit if the property is purchased from a seller with seller financing and the seller retains title to the property?
Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Examples of this would include a land contract, contract for deed, etc. According to the IRS, factors that would demonstrate the ownership of the property would include: 1. the right of possession, 2. the right to obtain legal title upon full payment of the purchase price, 3. the right to construct improvements, 4. the obligation to pay property taxes, 5. the risk of loss, 6. the responsibility to insure the property and 7. the duty to maintain the property.

Are there other restrictions to taking the credit?
Yes. According to the IRS, if any of the following describe your situation, a credit would not be due.

• You buy your home from a close relative. This includes your spouse, parent, grandparent, child or grandchild.
• You do not use the home as your principal residence.
• You sell your home before the end of the year.
• You are a nonresident alien.
• You are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This does not apply for a home purchased in 2009.)
• Your home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)
• You owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2009, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2006, through July 1, 2009.

Can you buy a home from a step-relative and be eligible for the credit?
Yes. Provided the person you are buying a home from is not a direct blood relative, the purchase would be allowed.

Can parent(s) who will not live in the property cosign for a mortgage for their child and the child that is a qualifying FTHB still be eligible for the credit?
Yes.

Can a separated spouse who has not owned a home for four years qualify for the FTHB tax credit if the spouse has owned a property anytime in the last three years?
No. However, the spouse may be eligible for the repeat buyer credit. The best path to take in any situation regarding income taxes is to speak with a professional tax preparer or CPA.

If you have any questions that fall outside the situations here, give me a call and if you do not have an accountant to speak with, I can refer you to one.

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Denver ranked No. 39.

In its “Metro Monitor” report, released this week, the Brookings Institute assessed how the recession has affected big-city employment, wages, gross metropolitan product, housing prices and foreclosure rates.

The primary conclusion was that the recession has had very different impacts on cities. As a result, an economic recovery will likely vary from region to region or city to city.

“All metropolitan areas are feeling the effects of this recession, but the distress is not shared equally,” Alan Berube, research director of the Metropolitan Policy Program at Washington-based Brookings and co-author of the report, said in a statement.

“While some areas of the country have experienced only a shallow downturn, and may be emerging from the recession already, people living in metro areas that are now performing weakest economically should prepare themselves for a long recovery period,” Berube said.

The overall rankings were based on four factors:

Change in employment from the peak quarter to the first quarter of 2009.
Change in the unemployment rate from March 2008 to March 2009.
Change in gross metro product from the peak quarter to the first quarter of 2009.
Change in housing prices from Q1 2008 to Q1 2009.
Colorado Springs showed a 3.9 percent drop in unemployment from the peak quarter to first quarter 2009. The unemployment rate increased by 3 percent. The gross metro product fell from the peak quarter by 2.1 percent and housing prices declined by 0.9 percent on a year-over-year basis.

Source:  Colorado Springs Business Journal

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The index level is almost now back to where it was last summer, which was just before panic and paralysis set in and the index fell off a cliff to levels never before recorded. With the recovery in the index over the past two months led by the forward-looking component, the big question now is whether the increasingly widespread expectation that economic recovery is just around the corner will be fulfilled or dashed. Our belief remains that what we are seeing in these (and most other) data is a shift from “end of the world” readings to those that more closely approximate something seen in a regular economic slump. We do not think that conditions are going to progress in a straight line up from here, and our forecast remains that the road to recovery will be a longer and more difficult journey than most believe at the moment. –Joshua Shapiro, MFR Inc.
Although the index is still low in absolute terms, it is at its highest level since September, and the 30-point increase over the last three months is the largest three-month gain on record. Sharp gains in confidence typically occur right at the end of a recession. These gains are due to jumps in expectations, which is also what is happening now. –Abiel Reinhart, J.P. Morgan
This is a much bigger jump than we expected… Even so, if the new level is maintained the Conference Board index is consistent with real spending growth of less than 1%, which is not much of a green shoot. –Ian Shepherdson, High Frequency Economics
That was the biggest one-month improvement in the index in more than 6 years and reflected mainly a big 22.3 point gain in the index measuring expectations about the outlook. Consumers also assessed current conditions a bit more favorably, but that part of the index remains quite low… The improved mood of consumers is encouraging. If the job market stabilizes, the improvement in confidence could translate into more spending and make the better outlook a self-fulfilling prophecy. –Nomura Global Economics
This is another strong report in favor of the U.S. consumer, and we will take good news where we can. However, we cannot lose sight that the trend is key, and given that the index continues to sit in historically low territory (note: average index value has been 95 since 1977) should temper the immediate implications of this report. –Ian Pollick, TD Securities
The May consumer confidence report is another indicator that suggests that the recession’s grip on the economy has slackened significantly and that the recession may be drawing to a close. While the labor market indicators still point to significant job losses, both the jobs components of this report and the weekly data on initial jobless claims suggest that the peak rate of job loss is now behind us. –RDQ Economics
The level of confidence still remains low. Much of the weakness is due to accelerating job losses, deepening house price declines, soaring foreclosures, tighter credit standards, and financial market volatility. Confidence is still mired in recessionary territory although consumers are not as depressed as they were earlier in the year. –Stephen A. Wood, Insight Economics
Compiled by Phil Izzo

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ADP says there were 31% fewer private sector job losses in April, while outplacement firm says pace of layoffs slows.

NEW YORK (CNNMoney.com) — The pace of U.S. job losses may be slowing, according to two private reports released Wednesday.

Automatic Data Processing, a payroll-processing firm, said private-sector employment decreased by 491,000 in April, a 31% improvement from the revised 708,000 drop in March.

Economists surveyed by Briefing.com had expected a loss of 643,000 jobs last month.

The report, which is based on payroll data from 500,000 U.S. businesses, showed the number of job cuts declined across all sectors in the survey.

“There’s a sense here of a turn, which is good news” said Joel Prakken, an ADP spokesman and chairman of Macroeconomic Advisers, LLC. But the job market “is likely to decline for at least several more months, although perhaps not as rapidly as during the last six months.”

Separately, outplacement firm Challenger, Gray & Christmas Inc. reported that the number of layoffs announced in April fell for the third straight month.

Job cut announcements by U.S. employers totaled 132,590 in April, an improvement of 12% from March’s 150,411 cuts. It was the lowest total since last October, according to Challenger, but the April figure was still 47% higher than job cuts announced in the same month a year ago.

The government/non-profit sector was hit the hardest for the second month in a row, Challenger said, with 27,624 announced job cuts in April. The automotive industry had the second highest tally of planned cuts, thanks in part to further cuts announced at General Motors.

“Job cuts are still at recession levels, but the fact that they are falling is certainly promising and may suggest that employers are starting to feel a little more confident about future business conditions. Hopefully, the next few months will bring further relief, as we tend to see downsizing activity slow during the summer months,” John Challenger, chief executive officer of Challenger, Gray & Christmas, said in a statement.

Employers have announced 711,100 job cuts so far this year. That is 145% percent higher than the 290,671 job cuts announced in the first quarter of 2008, Challenger said.

The reports set the tone for the government’s monthly jobs report due Friday. The Labor Department report is expected to show that the economy shed 620,000 jobs in April, less than the 663,000 reported for March, according to a consensus estimate of economists complied by Briefing.com. The unemployment rate is predicted to rise to 8.9% from 8.5%.

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The U.S. economy has contracted sharply since last autumn, with real gross domestic product (GDP) having dropped at an annual rate of more than 6% in the fourth quarter of 2008 and the first quarter of this year. Among the enormous costs of the downturn is the loss of some 5 million payroll jobs over the past 15 months. The most recent information on the labor market-the number of new and continuing claims for unemployment insurance through late April-suggests that we are likely to see further sizable job losses and increased unemployment in coming months.

However, the recent data also suggest that the pace of contraction may be slowing, and they include some tentative signs that final demand, especially demand by households, may be stabilizing. Consumer spending, which dropped sharply in the second half of last year, grew in the first quarter. In coming months, households’ spending power will be boosted by the fiscal stimulus program, and we have seen some improvement in consumer sentiment. Nonetheless, a number of factors are likely to continue to weigh on consumer spending, among them the weak labor market and the declines in equity and housing wealth that households have experienced over the past two years. In addition, credit conditions for consumers remain tight.

The housing market, which has been in decline for three years, has also shown some signs of bottoming. Sales of existing homes have been fairly stable since late last year, and sales of new homes have firmed a bit recently, though both remain at depressed levels. Although some of the boost to sales in the market for existing homes is likely coming from foreclosure-related transactions, the increased affordability of homes appears to be contributing more broadly to the steadying in the demand for housing. In particular, the average interest rate on conforming 30-year fixed-rate mortgages has dropped almost 1-3/4 percentage points since August, to about 4.8%. With sales of new homes up a bit and starts of single-family homes little changed from January through March, builders are seeing the backlog of unsold new homes decline-a precondition for any recovery in homebuilding.

We continue to expect economic activity to bottom out, then to turn up later this year. Key elements of this forecast are our assessments that the housing market is beginning to stabilize and that the sharp inventory liquidation that has been in progress will slow over the next few quarters. Final demand should also be supported by fiscal and monetary stimulus. An important caveat is that our forecast assumes continuing gradual repair of the financial system; a relapse in financial conditions would be a significant drag on economic activity and could cause the incipient recovery to stall.

Even after a recovery gets under way, the rate of growth of real economic activity is likely to remain below its longer-run potential for a while, implying that the current slack in resource utilization will increase further. We expect that the recovery will only gradually gain momentum and that economic slack will diminish slowly. In particular, businesses are likely to be cautious about hiring, implying that the unemployment rate could remain high for a time, even after economic growth resumes.

In this environment, we anticipate that inflation will remain low. Indeed, given the sizable margin of slack in resource utilization and diminished cost pressures from oil and other commodities, inflation is likely to move down some over the next year relative to its pace in 2008. However, inflation expectations, as measured by various household and business surveys, appear to have remained relatively stable, which should limit further declines in inflation.

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“If a house is in a good neighborhood, is maintained and is a good value, it’ll get multiple offers,” says Julie Holt, owner of Anclote Title Services in Tarpon Springs, Fla. One in 10 homes now draw multiple offers, up from one in 30 last fall, she says.

Multiple bids usually signify a market in which prices are rising and buyers outnumber sellers. That’s not true now, given rampant foreclosures, still-falling prices in many regions and low demand for higher-price homes. Multiple offers on distressed properties are also not new, but their recent frequency offers hope for the real estate market, says Beth Peerce, treasurer of the California Association of Realtors (CAR).

“When you begin to see people willing to fight for a property, that’s a good sign,” she says. “We are beginning to see the beginning of the end of a disaster time.”

The competition is driven by prices — California’s are down 39% from a year ago, CAR says — low mortgage rates and a new federal tax credit of up to $8,000 for some first-time buyers.

Other hard-hit regions are also seeing more multiple offers, mainly on:

•Lower-end homes. In Phoenix, where prices have dropped 50% from their 2006 peak, competition has heated up for homes under $150,000, says Realtor Michael Orr, who publishes the Cromford Report on the Phoenix-area market. He recently considered bidding on one house for $70,000. It had received 14 offers, and Orr was told to bid $110,000 to be considered.

•Good values. Holt just handled a closing on a Tarpon Springs home close to schools that was listed at $185,000. It won three bids and sold at $192,000. Three years ago, the home would have sold for $280,000, Holt says. Higher-price homes are also getting more multiple bids. “People who always wanted to live on the water are realizing it is time to buy before prices go up,” Holt says.

Some bidders may think foreclosure bargains are waning, says Mike Lyon, CEO of Lyon Real Estate in Sacramento. That market has 1,600 bank-owned properties for sale, vs. 2,800 a year ago, he says.

He says banks have lured multiple bids by setting below-market prices. Lyon cautions that government steps to curb foreclosures have delayed some.

“People are perceiving that they are running out. But there will be more,” he says.

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Fiction: The credit score on my consumer credit report should be the same as the one the mortgage company returns.
Fact: When mortgage companies order a credit report the credit bureau will include a “mortgage adjustment” that is factored into the customer’s credit score. These adjustments are not controlled by the mortgage lender, but by the credit bureaus themselves. This adjustment takes a customer’s past mortgage history into account and will reflect accordingly in the credit scores returned to the lender. For example, a customer with an extensive clean history of mortgage payments will have a different adjustment than a customer who has never had a mortgage in the past.

Fiction: There is nothing a customer can do to fix errors on their credit report.
Fact: Customers who have errors on their credit report have the ability to file a dispute with the credit bureau to correct the erroneous information. Your customer can go to www.annualcreditreport.com and obtain a free copy of their credit report. They will need to submit documentation supporting their claim that the information reported is erroneous, and the credit bureau has 30 days to confirm the information and update the repositories.  

Fiction: My score will drop if I apply for new credit.
Fact: If it does, it probably won’t drop much. If you apply for several credit cards within a short period of time, multiple requests for your credit report information (called “inquiries”) will appear on your report. Looking for new credit can equate with higher risk, but most credit scores are not affected by multiple inquiries from auto or mortgage lenders within a short period of time. Typically, these are treated as a single inquiry and will have little impact on the credit score as stated above.

Fiction: A poor score will haunt me forever.
Fact: Just the opposite is true. A score is a “snapshot” of your risk at a particular point in time. It changes as new information is added to your bank and credit bureau files. Scores change gradually as you change the way you handle credit. For example, past credit problems impact your score less as time passes. Lenders request a current score when you submit a credit application, so they have the most recent information available. Therefore by taking the time to improve their score, will put your customer is better position to get approved for a loan.

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Last Week in Review

If you have any questions regarding mortgages, please call me!  Your trusted Colorado Springs Real Estate Agent

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The following article shows one of the many reasons that I love living in Colorado Springs and helping people find homes by working as their Colorado Springs Real Estate Agent.

The economy shed 651,000 jobs in February and 4.4 million since the recession began in December 2007. Only a handful of metro areas have escaped falling employment over the past three months. Yet there are still some places out there that remain attractive to businesses.

“Austin, Boulder [Colo.], Fort Collins [Colo.] and to a lesser extent Raleigh all have a lot of high-tech investment,” she says. “We think that is one of the first things that comes back once the economy does recover.”

Our 11th annual ranking of the Best Places for Business and Careers features clear winners in North Carolina and Colorado, home to a combined 10 of the 20 top metro areas.

Leading the way is Raleigh, N.C., which grabbed the top spot for a third straight year on the strength of strong job growth (both past and projected), low business costs and a highly educated workforce.

Employment is expected to fall during 2009 in Raleigh after jobs were added at a 4% annual clip the past five years. But the job picture is expected to brighten in 2010 and 2011, and the three-year projected annual employment gain is 1.4%. according to Moody’s Economy.com, 15th best in the country.

Helping fuel Raleigh’s strong economy is the Research Triangle Park, one of the oldest and largest science parks in North America. It is located between Raleigh and Durham and is home to 170 companies employing 42,000 people. Big employers include Biogen Idec (nasdaq: BIIB – news – people ), Cisco Systems (nasdaq: CSCO – news – people ) and IBM (nyse: IBM – news – people ).

“Raleigh is holding up better than any other place in North Carolina,” says Matthew Martin, an economist at the Federal Reserve Bank of Richmond, Va. He cites the significant higher education presence and low manufacturing base in the area for Raleigh’s steady economy.

 
Keeping Raleigh company at the top are fellow Tar Heel State metros Durham (ranked third), Asheville (sixth), Wilmington (13th), Winston-Salem (18th) and Charlotte (19th). 
 

Our rankings looked at the 200 largest metropolitan areas in the U.S., which range from the New York metro and its 11.7 million people to Olympia, Wash., with a population of 241,000. We examined each on 11 different criteria. Economic research firm Moody’s Economy.com supplied data on job growth over the past five years and projections through 2011. Economy.com also provided business and living cost data as well as income growth and migration trends.

We also turned to Bert T. Sperling, city researcher and co-author of Cities Ranked & Rated for some labor supply and quality of life information. Sperling furnished data on college attainment, crime rates, local colleges and cultural and recreational opportunities in the area.

In a nod to the current economic climate, we added two new categories this year: projected job growth and subprime mortgages as a percentage of total originations over a three-year period. This change helped boost several metros in the rankings, most notably Austin, Texas, which ranked eighth this year, up from 47th last year. Austin’s projected annual job growth rate of 2.3% is fifth fastest in the country, and its subprime mortgage exposure clocked in at 13th.
The city has a fan in the Charles Schwab Corp. (nasdaq: SCHW – news – people ). “The city of Austin is extremely business-friendly. They have bent over backwards to accommodate us,” says Glenn Cooper, head of real estate at Schwab, which expanded its Austin presence in 2007 when it purchased the 401(k) Co. Cooper highlights the political environment, culture and cost of living as draws for Schwab to Austin.

Bringing up the rear of our rankings are the troubled spots in California. The Golden State had its worst showing ever in our tally. It is home to six of the seven lowest-rated spots, and Riverside was the only one of its 21 metro areas (among the country’s 200 biggest) that cracked the top 100. Most California metros are burdened with sky-high living and business costs, and the job outlook is week. The unemployment rate in 199th-ranked Merced, Calif., is expected to hit 21% in 2010.

The current recession is too deep and widespread for even our best-rated cities to escape damage. Yet when things do turn around, expect many places ranked at the top to be at the head of the pack, notes Marisa Di Natale, an economist at Economy.com.

 

Forbes Top Ten cities for businesses and careers

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