April 1, 2009
Home News & Tribune
By Jarrod C. Grasso, RCE
The writer is the executive vice president of the New Jersey Association of Realtors.
Pundits and partisans alike are fiercely debating the benefits of the recently enacted federal stimulus bill, formally known as the American Recovery and Reinvestment Act of 2009. There is one thing they can all agree upon: the stimulus bill provides enormous incentives for families looking to purchase a home, especially for first-time home buyers.
In fact, the provisions incorporated in the new stimulus bill coupled with the rock-bottom mortgage rates make this the most advantageous time to buy a home in recent memory.
The best-known and probably most-powerful provision of the stimulus program is the $8,000 federal income tax credit that the bill extends to families or individuals who purchase their first home before Dec. 1. This tax credit would wipe out nearly half of the entire federal income tax obligation for a family with a combined income in the range of $100,000.
Unlike the previous $7,500 tax credit, new home purchasers who take advantage of these tax benefits are not required to pay them back to the federal government. In short, the new tax credit is both larger and more taxpayer-friendly. Like the previous tax credit, however, its full benefits are limited to individuals earning as much as $75,000 and couples earning as much as $150,000. The credit is phased out for filers earning more than those amounts and is reduced to zero for individuals earning more than $95,000 and married couples earning more than $170,000. It is available for first-time buyers, anyone who has not owned a principal residence three years prior to their purchase. There are other important benefits included in the stimulus bill that are particularly helpful for home buyers.
The stimulus bill, thankfully, preserves the 2008 limits for loans issued through the FHA, Fannie Mae and Freddie Mac. The loan limits mean that these critical lending agencies are authorized to issue loans in most New Jersey counties of up to as much as $729,000 or $440,000, depending on the loan program. These loans are stable, too, as Fannie Mae and Freddie Mac are backed by the government. These generous lending limits are critically important in New Jersey, where housing values are typically above the national average.
A portion of the American Recovery and Reinvestment Act authorizes the expenditure of an additional $2 billion on programs to stabilize and preserve neighborhoods where foreclosures have taken place. The program provides grants to states and municipalities to address problems that can occur when entire neighborhoods are decimated by foreclosures. These funds can be used to purchase, repair and resell abandoned properties.
The neighborhood stabilization aspects of the stimulus bill would also allow state and local governments to make loans for the purchase of distressed properties by low- and moderate-income individuals. Neighborhood stabilization programs like this can help to bring qualified families and individuals into the housing market while at the same time guard against the blight that can occur when neighborhoods are plagued by abandonment and foreclosures.
The stimulus bill also provides vast incentives for energy conservation, weatherization and the use of other green technologies. The bill provides tax relief and accelerated depreciation for small businesses and others who invest in energy conservation and the use of alternative energy in commercial buildings.
Homeowners can also benefit from grants to state and local governments for energy audit programs and for retrofitting homes in order to make them more efficient. These grant programs can significantly lower the monthly utility costs of owning a home.
Although the national economy is perilous, the underlying principles of the real estate market remain strong. Congress and the president were right to focus on housing as a key driver for the American economy. A vibrant economy depends upon a vibrant housing market. Assuring that Americans can purchase, own and maintain the homes in which they live and raise their families is fundamental not only to our prosperity but to the essential American value of owning a home.