STIMULUS PACKAGE – WHAT IT MEANS TO BAY AREA HOMEBUYERS?

February 13, 2009 · Annie Chang

Our Broker posted a blog yesterday about “STIMULUS PACKAGE, WHAT REAL ESTATE PARTS MEAN?” Since I am currently working with a few prospective first-time homebuyers, I thought I’d picked their brain during my follow-up calls after the blog was posted. In particular, I asked them “if the stimulus package is finalized and homebuyers will get the benefit of the $8K tax credit, is that a good incentive for you to buy a house now?”

Interestingly, their answers all seem to boiled down to one thought: if they are ready and want to buy a house now, they will buy no matter what; The tax credit of $8K will NOT be the factor that push them off the fence. On the other hand, if they are “just looking” and don’t intend to buy soon, they will not take action because of the $8K tax credit either.

Now, note that all of these people intend to buy a home in San Francisco Bay Area and their target home price is $500,000 on average. Their tax bracket is generally in 25%-30%. One of them is a CPA and he said “free Money is a good way to convince me to buy [but only] around areas where houses are a lot cheaper.” He also added that the $8K credit works well for house price that is $80K (wait, do they even exist?…), because “if you buy a house around $80K, you already got a 10% discount. Sell the house back out 10% profit in your pocket as long as you hold it for a certain number of years.” And that’s assuming housing market does not continue to drop.

When asked what will be most helpful to get them into a home now, they unanimously came to the same response — any program that helps with down payment. Although they have good credit and a reliable income, coming up with 20% of the purchase price (which is the minimum down payment requirement for most conventional loans nowadays) is the toughest part for them.

I think the best way to find out if a stimulus plan works or not is to go directly to the source — the consumers — and listen to what they have to say.

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Filed Under Important Thoughts, Neighborhood News, Real Estate for Buyers and Sellers, Real Estate in the News, Real Estate on the Web

Tags: consumers, down payment, first time home buyers, homebuying, real estate, stimulus package, tax credit

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9 Responses to “STIMULUS PACKAGE – WHAT IT MEANS TO BAY AREA HOMEBUYERS?”

Michael Monozon on February 13th, 2009 7:23 pm

Annie,great post, the buyers are the only ones who know the answer to the question. Thanks for sharing your client’s thoughts
Jean Joh on February 14th, 2009 2:43 pm

Thanks for the post Annie. I’m finding that the tax credit/loan is most appealing to my buyer clients who are most likely looking at an FHA loan for their purchase, due to the 3.5% down payment. Most people seem to recognize that it’s a great time to buy a home, so they’re interested in finding out how they can achieve this with the resources they have. As you said, though, it wouldn’t be the one critical factor that pushes them one way or the other.
Lee Ginsburg on February 14th, 2009 8:35 pm

Annie,

Yes! If they only asked the people whom are affected by the decisions. But “free money” should not be ignored. It could be used towards principal and save a lot of interest in the long run. I quickly estimate $20,000 or more for the term of the loan. Added to the $8000 now we are talking almost $30,000. Sounding better. But first time buyers are not thinking that far out, so we need to explain how to use the FREE Money wisely.
Maybe a mortgage broker could run some numbers for us and give an accurate savings of dollars.
Lee
Flroie Vasquez on February 15th, 2009 11:34 pm

I liked your post Annie. The way I see it is People who want to buy are going to buy with or without the credit. Enjoy the rest of your weekend.
Shokoofeh Nowbakht on February 17th, 2009 1:16 am

Great Idea Annie. I will find out how my clients think about this new stimulus package. And, like Jean Joh says, only my FHA and VA clients have shown interest.
Brian Boisson on February 17th, 2009 9:57 am

Annie,

Very interesting thought and what some people hear only is an “$8000 credit”, not a tax credit.

Although the credit is real money, it won’t be realized until the buyer files tax returns.

Any news like that in the media is good news though and can only help.

Brian
Jonathan Shaw on February 18th, 2009 4:14 pm

Hi Annie,
Thanks for the insight. The Stimulus Package will hopefully get more people off the fence and into the housing market.
Jonathan
Annie C. on February 18th, 2009 6:27 pm

Thanks everyone for your valuable feedbacks and comments! Like many have mentioned, I hope that the tax credit incentive as well as the entire Stimulus Package will jumpstart the market. After all, a tax credit is like free money – if it isn’t enough to get someone off the fence, at least it’ll serve as a bonus for those who are willing, able, and ready.

I agree with Lee’s comment that some buyers need to be educated on how to use the *free* money and see actual value in it.

Thanks again for your comments!
Adam Chinn on February 20th, 2009 9:25 pm

Great Post Annie,
Hopefully the stimulus package will help everyone out. With my current and recent clients it did not seem to change their minds on weather to buy a home or not. Since they are ready to buy, they are going to do it. One of them is taking advantage of the FHA program with 3.5% down while a few others are putting 10% down for their loan. It is great to work with first time home buyers. They are very happy they can finally afford a home of their own. Just a little of what i have been experiencing.