Home buyer tax credit extended.
Ted Simons: Good evening, and welcome to "Horizon." I'm Ted Simons. First-time home buyers have more time to take advantage of an $8,000 tax credit. Last week President Obama signed legislation extending the credit into next year. Here to talk about that and other housing news is Catherine Reagor, real estate reporter for "The Arizona Republic." Good to have you back. Thanks for joining us.
Catherine Reagor: Absolutely.
Ted Simons: This new tax credit, $8,000 for first-time home buyers extends until when?
Catherine Reagor: April 30th, but if you have a deal going you can close later than that. You just have to have the paperwork. Into early next summer.
Ted Simons: Contracts by like April?
Catherine Reagor: Yes. If you have it, the contract in the works, you can close after April 30th.
Ted Simons: OK.
Catherine Reagor: You have to have the signed documents going.
Ted Simons: Let's talk about qualifications. Income qualifications?
Catherine Reagor: They have increased. It was $75,000 for individuals, $150,000 for couples, now it's up to $125,000, to $225,000 for couples. Even if your income is above that, it prorates. You can't go too much above that, but it really --
Ted Simons: What's the reasoning behind that?
Catherine Reagor: To drive home sales. To help the housing market. They say the issues, even in D.C. where they don't have the housing problems, it's the darling of the real estate market, like we do in metro Phoenix, that the issue we need to do -- they need to do something to help us with sales, help prices, slow down foreclosures.
Ted Simons: And we're talking the housing has to be below $800,000?
Catherine Reagor: 800,000, which pretty substantial here in the valley. And then the expansion, the big deal to people who own homes for five years. If you sell you can get up to $6500 tax credit. So that is the first time. That's -- they really want that the first time and didn't get it, and --
Ted Simons: Let's go over that again. If you've lived in your home for five years you get a $6500 tax credit if you buy what, a bigger home, a smaller home?
Catherine Reagor: I believe it's any home. If you sell and buy another home it's just spurring that kind of cycle of sales, and helping the -- in some cases first-time homeowners, even though there are a lot of programs, don't have the ability to buy. But if they can sell and move with that market and buy it keeps the cycle going.
Ted Simons: The move-up market especially. It sounds like people have seen what the tax credit has done and figured, let's keep doing it.
Catherine Reagor: Yes.
Ted Simons: With that in mind, though, is there a Cash for Clunkers kind of warning here in that once all this goes away, the whole market just goes belly up?
Catherine Reagor: Big concern for that. We know it's helped over -- they believe it's spurred over a million sales nationally. Here in Arizona, in metro Phoenix, at least 10, 20,000 sales so far this year. The concern is, yes, when it expires, it slows. And what happens, do we go back to where we were, the foreclosures are rising, but, yeah, the consensus, I was just actually at a big real estate meeting, urban land, that was the talk. This has given us a nice boost up. We wouldn't have had this without the federal stimulus and it's great for the expansion, it was right after the extension, but what happens next summer? Do we --
Ted Simons: Talk more about that conference you were attending, because apparently Phoenix was a poster child for a lot of things that aren't good in the housing market.
Catherine Reagor: Unfortunately, yes. It's the urban land institute, the big real estate meeting they have annually in the big leaders, decision makers, analysts come together and they make the developers, home builders make their plans wayed -- based on the consensus forecast out of there. And there's a report called emerging trends, and it looks at the top markets, it forecasts where we're going to be, and it's been pretty accurate. And it's price waterhouse coopers. And the report loved Phoenix five years ago, four years ago, this year they said Phoenix is, and they used the term "poster child" of housing market run amok with growth, and the cheap mortgages, and there's concern. Now, the good note on that is that we do have population growth. And they saw that. And there were markets definitely lower, but we weren't the top 10 to watch for for good things to happen, and that's a concern. One thing that was said is that those opinions were taken six months ago, and things are a little better now.
Ted Simons: Let's talk about real quickly how things are right now. I'm seeing a lot of for sale signs still. I'm seeing a lot of for rent signs. What's going on?
Catherine Reagor: There's definite lay glut in the rental market. The foreclosure homes to sell, the 60-70,000 in the past year half have gone to investors. Most of those going into rentals. It's very competitive. Rent prices dropping, look at the apartmenting. The concessions they're giving. Scooters, ipods, so if you are a long-time landlord, you have to compete with that. If you're a landlord who bought in 2002, 2004, 2005, you bought at a higher price than new landlords.
Ted Simons: But folks are buying. The speculation is still happening out there. Especially on the lower end. Correct? That's not necessarily a good sign either.
Catherine Reagor: It's good that the foreclosures are reselling. It's good if someone is in them, and that's not a vacant home in that neighborhood. One shift just in the past few months, more -- fewer investors buying foreclosures. At one point it was 75% foreclosures going to investors. We're down to below 50%. We know more first-time buyers are getting in, which is good. They're paying cash in most cases, the investors, which is better, it's tougher to walk away, but it's not a lot of fun to have too many rentals in your neighborhood.
Ted Simons: Last question here -- the bottom line, do we need to see lenders taking a better, bigger role in changing things?
Catherine Reagor: Absolutely. That's what everyone is saying, it's really -- if you just look at it analytically, that everything is in their court. To do the loan modifications, that will slow foreclosures. Many got the federal money, what they do F. they work with more borrowers, if they do more short sales, if lenders are quick on decisions, if they don't put another flood much foreclosures on are market it won't drop down our prices.
Ted Simons: Good to have you here. Thanks for joining us.
Catherine Reagor: Thank you.
Catherine Reagor:The Arizona Republic;