First-time buyers race to qualify for $8K federal tax credit

LOS ANGELES – Sept 10, 2009 – First-time homebuyers have just 12 weeks to find and close on a home to qualify for the $8,000 federal tax credit by Nov. 30 – before the Dec. 1, 2009, deadline.

Those just beginning the process will have to beat the average time it takes to buy a home, a challenge that real estate professionals can help buyers meet even though it’s taking longer today to close most transactions today, according to Realtor.com officials.

On average, first-time buyers search 12 weeks to find a home, while closing can take up to 60 days, depending on individual circumstances and local regulations.

Additionally, the tax credit has proved to be extremely popular this year: studies show that taking advantage of the first-time homebuyer’s federal tax credit and relevant state incentives is the most important reason motivating 10.8 percent of buyers today. In fact, approximately 1.14 million buyers have already filed for the credit. Many more are expected to file for the credit when income taxes are due April 2010.

Historically high affordability is a major factor driving first-time homebuyers today, a growing group that accounted for one third of all purchases in July 2009, according to a survey by the National Association of Realtors®.

NAR’s affordability index in July 2009 was 36.0 percentage points higher than July 2008. Under these conditions, the typical median-income family can allocate 15.8 percent of their gross income to mortgage payments, well below the traditional allowance of 25 percent. Interest rates, which play a major factor in affordability, remain low, and averaged 5.22 percent in July for a 30-year fixed rate loan.

Realtor.com President Errol Samuelson said, “The national median home today costs approximately $174,100. By moving quickly to find and close on a home by Nov. 30, first-time buyers qualifying for the $8,000 tax credit can actually purchase this same home for only $166,100, an almost 4.5 percent discount off of the price of a typical new home. Because affordability this year is at its highest level in 28 years, and the market offers an incredible selection of homes within reach of most first-time buyers, we expect their numbers to grow as they pursue this once-in-a-generation opportunity to become homeowners.”

He added that by combining the effective use of technology for information-gathering with expert advice from local Realtors, today’s first-time home buyers can beat the clock and use the $8,000 federal tax credit, along with any available state-level credits, to purchase a home before the Dec. 1 deadline.

“By moving quickly, being prepared to make decisions in the face of increased competition, and using the expertise of a real estate professional, first-time homebuyers can still close on time and qualify for the $8,000 federal tax credit,” Samuelson said.