The 2009 KY General Assembly passed a new home tax credit for home buyers, which will be capped at $25 million, so if you are looking to take advantage of this credit, you should act fast. Qualified buyers are those who purchase a single family dwelling. The program is not available to buyers that are eligible for the first time home buyer tax credit under section 36 of the Internal Revenue Code. The credit shall apply to the tax liability of a qualified buyer who purchases a qualified residence within one year of the passage of this act. For more information about the credit, visit http://www.lrc.ky.gov/record/09SS/HB3.htm.

In 2007, inventories of home sales reached a high of 10.6 months' supply, almost twice the 5.5 months' supply considered balanced. Inventories started easing in 2008, falling to 9.9 months in the third quarter. What you are seeing is that less homes are coming on the market because potential sellers are weary of the market, and homes that are priced right are being snatched up. Plus, you are seeing a reduction in permits for new construction. In 2009, it is expected that there will be a 8.8 months' supply based on market trends in 2008. However, delinquancies and foreclosures will continue to rise due to the rise of unemployment (Data obtained from the National Association of Realtors).

It is projected that by 2010, 47 markets will swing from negative to positive territory, which means we will see some positive improvements after next year. In 2008, the median house price was $133,630, and is expected to decrease by -3.9% in 2009, but in 2010, it is expected to improve by .3% (Fortune Magazine, 12, 2008 issue). This means that for buyers, 2009 is the time to take advantage of purcashing a new home when interest rates will hover around 5% or lower.

The National Association of Realtors (NAR) paints a much brighter picture. After two years in a row of declinging sales, the NAR projects that home sales are expected to edge up 6%. For example, NAR's affordability index jumped to 131 at the end of 2008 up from 112 in 2007. It is expected to hover around 128 in 2009. The affordability index means household earning the national median income have 131 percent of the income needed to buy a median-priced home.

The historic federal Reserve's announcement yesterday, December 15th, that it would allow a short-term interest rate to fall as low as zero means money is cheap now. Experts predict that mortgage rates will fall to 5% or lower. If there was ever a time to buy, it is now! Even a 10 percent drop in home prices is immediatly nullified by a mere 1 percentage point increase in interest rates on a 30 year mortgage. Now is the time for first time homebuyers to take advantage of the low rates. For those who fear trading up, it is still a good time to buy. Savings on a larger home purchase, will offset a loss on your current home. For example, if home prices dropped 5%, and you listed your home at $200,000 and sold it at $190,000 = $10,000 less (5% less). However, if you bought a new home listed at $400,000 for $380,000 = $20,000 savings.

RealtyTrac reported Kentucky foreclosures declined by 33.5%. The state faired far better than the nation, which saw a 24.5% increase in October, when Kentucky saw a 35% decline. Kentucky has one foreclosure for roughly 3,500 households compared to the nation that has one foreclosure for roughly 450 households.

The National Association of Realtors (NAR) reported that there is a rise in first time home buyers, and they plan to own their own homes longer than in the past.  NAR chief economist said a higher trend to first time home buyers makes perfect sense..."First time home buyers are much more flexible in entering the market because they aren't concerned with selling an existing home. Given low home prices, supply, and affordable interest rates, its been an optimal time for entry level buyers with a long-term view." The number of first time home buyers rose 2 percent in 2008, which is a considerable gain in this slow real estate market.

If you are one of those buyers waiting for the bottom of the housing market in Louisville, think again! A study conducted by Paul Coomes, Economic Prof., at the University of Louisville, found that in 2007 between .6 and .8 percent of Jefferson County homeowners endured foreclosure, a rate one-third the size reported in the media, and around one half of the foreclosed properties were owned by real estate investors, presumably too highly leveraged to withstand the recent slowdown in home price appreciation. Louisville has a very high percentage of homeowners who carry no mortgage debt, and the lowest monthly housing rental rates of 15 metropolitan areas studied in comparison to Louisville. To read these studies and more about the Louisville housing market, click here.

If you are planning on building a new home, you may want to secure the lot and builder now. Lumber prices were at their lowest this past June, 2008, but lumber prices are on the rise again. Compared to 2005, lumber has been very affordable, but prices are climbing. To review the trends in lumber prices, click here!

Home buyers can use the $7,500 tax credit on their 2008 tax return, or a year early, as a down payment in 2009. In addition, home buyers who buy a home after filing their 2008 taxes, can later file an amended return that includes the tax credit.

Home buyers, who are certain that they qualify for the tax credit, can adjust the automatic income tax on their IRS W-4 to adjust their witholding, thereby increasing their take home pay!

For more information on how to use the tax credits as a down payment on your first home purchase, please review question 19 - 21 on this website and consult with an accountant as it relates to your income: www.federalhousingtaxcredit.com.

On July 30, 2008 Congress passed into law the Housing and Economic Recovery Act of 2008, which allows first time home buyers to take a $7,500 tax credit from the purchase of a single-family home. Any home buyer who has not owned a home in the past three years is eligible for this tax credit, and some home buyers who are not U.S. Citizens may also apply.

The tax credit operates like a zero-interest loan. Assuming that interest rates are 7% during this time frame that would mean that a home owner saves up to $4,200 in interest payments over the 15 year repayment period of $500 a year. For example, the home buyer tax credit saves home buyers more than $8,100 in interest payments alone. The program is a tax credit because it operates through the tax codes and provides a reduction in tax liability in the year it is claimed. For more information about how this tax credit works, visit: www.federalhousingtaxcredit.com

If you are a first time home buyer then you should really consider buying a home this year! HR 3221, known as the American Housing Rescue and Foreclosure Prevention Act of 2008, contains a provision that would provide a temporary first time home buyer tax credit of $7,500 for the purchase of any home used as a principle residence and closed on/between April 9, 2008 and April 1, 2009. The National Home Builders Association is trying to extend that date to June 30, 2009!

Just take a look at this link, and you'll see that Louisville's real estate market is performing very well compared to the nationwide trends that you hear about on the media. Click Here!

In the 1950’s mortgage rates hovered around 5% - 5.5%. However, in the 1970’s mortgage rates went up as much as 23%.  During the 1980’s, interest rates started falling, and by the 1990’s, mortgage rates ranged between 7% and 10%. In the 1990’s a 7 -10% loan was considered a good loan at the time. Now that we are closing in on a 50 year low of mortgage rates, it should make you wonder if this downward trend is going to continue indefinitely. Check out this historical graph of mortgage rates!

If you are ready to buy a home, then now is the time. If you wait too long to buy a home by looking for the perfect deal and interest rates do rise, then the money you are trying to save on a home by looking for the perfect deal will be that much more expensive if you wait too long to buy.  

While a homes is foremost a place to live, recently people have focused on homes as investments, bargains, steals, and sometimes as quick flips. These measures don't make a house a home that should be enjoyed and appreciated.

Cost is measured in many ways, but in the end a buyer should appreciate and value what they paid for during the time they live there. One thing that never changes in the real estate market is the high cost of cheap construction. Making a higher initial investment in quality will increase the monetary return down the road. Considering cost per square foot as the only buying parameter short-changes the long-term benefits of quality.

A buyer forms an impression of how a home is sold, delivered, and meets their expectations. Considering the quality, not just the cost, will be the factor that others will use when assessing your home in the future. What will you say about your home 5, 15, or 30 years from now?

Buyers can deduct mortgage interest and real property taxes. This includes all state and local taxes. It doesn’t include other fees and homeowner association dues. For example, if you’re in the 25 percent tax bracket, $100 in interest paid takes only $75 out of your pocket. As you pay down the mortgage, the amount in each payment falls over time.

There’s no limit on the number of properties on which you can deduct property taxes. However, be careful though because if your deductions are too great, you may be required to use the alternative minimum tax.

Interest paid on your personal residence or vacation home is deductible up to $1 million. If you plan to spend more than $1 million consult with your accountant.  

Gain Exclusion

If the property was your primary residence for two years, you can exclude $250,000 in gain (or $500,000 on a joint return). Otherwise, you can get a partial exclusion based on the time of ownership if you had to move because of employment or health reasons for example.  

Home offices

More tax advantages are available if you run or operate your business out of your home. Please consult with an account to identify items that can be deducted for tax purposes, or checkout IRS Publication 587 on home office exclusions.