Tami and Roger Crowell of Kalispell were growing weary of renting. With two young children and a third on the way, they wanted a home of their own to better fit their growing family.
“It has been a goal of ours since we’ve been married (to own a home),” Tami Crowell said. “We’ve been working on it for several years to get to the point where we could get a loan.”
For first-time buyers like the Crowells, the down market that’s been disastrous to others has meant a window of opportunity. The Obama administration has launched an ambitious effort to jolt the housing industry back to life, including an $8,000 tax credit for first-time homebuyers. Falling prices and historically low interest rates make the outlook even more encouraging.
And in Montana, a bill working its way through the Senate includes a program that could piggyback on those federal tax credits, making money available sooner and cutting homebuyers long-term costs.
All this isn’t to say it’s time to adopt a Pollyannaish outlook on a market still searching for its bottom, but the incentives are a silver lining for those like the Crowells who are able to take advantage of them.
“We wouldn’t have been able to buy the house if we hadn’t had the tax credit,” Tami Crowell said.
The couple had already filed for the $7,500 first-time homebuyer tax credit program that Congress approved last year, when they found out they were eligible for the $8,000 credit, which doesn’t have to be repaid like previous ones. With the help of an accountant, they filed an amendment to their return.
The Crowells hope to close on their new single-family, ranch style house in Kalispell this month.
In its efforts to stimulate the economy, Congress enacted legislation providing the tax credit as part of the nearly $800 billion economic stimulus plan passed earlier this year.
The credit is equivalent to 10 percent of the purchase price of the home, for a maximum of $8,000, and is available for a short time – only homes purchased on or after Jan. 1, 2009 and before Dec. 1, 2009 are eligible.
First-time homebuyers purchasing any kind of home – new or resale – are eligible for the tax credit. For the program, the Internal Revenue Service defines a first-time homebuyer as someone who has not owned a principal residence during the three-year period prior to the purchase. In the case of married couples, the law tests the homeownership history of both the homebuyer and their spouse.
To qualify for the full credit, single taxpayers can have incomes of up to $75,000 and married couples as high as $150,000. The credit amount is reduced proportionally for taxpayers with higher incomes up until $95,000 for singles or $170,000 for married couples.
The National Association of Realtors estimates that the tax credit will bring an additional 200,000 to 300,000 first-time buyers into the market this year.
It’s too soon to determine to what extent the new tax credit has affected the local real estate market. The Flathead housing market typically picks up as winter turns into spring, and real estate and building professionals say the word is spreading about the program.
On the state level, a provision in the state’s stimulus bill that could speed federal money into first time homebuyer’s hands is working its way through the Legislature.
Last week, the Montana Senate Finance Committee was looking at the state’s roughly $900 million federal stimulus plan, House Bill 645. Among the bill’s provisions is a program called Welcome Home, which would offer a short-term bridge loan that makes the national tax credit available as a down payment.
Under the program, the state would allocate $2 million to the Montana Housing Division. That money would be put into a contingent loan acquisition fund, which would use private lenders and qualified nonprofits to make $15 million in capital available. That money would then be used to fund short-term loans of $5,000 to first-time homebuyers who qualified for the national credit.
“For a first-time homebuyer a lot of times the biggest obstacle to overcome is coming up with a down payment,” Dustin Stewart, executive director of the Montana Building Industry Association, said. “But with a tax credit you don’t necessarily have the opportunity to put that money toward your loan principal.”
By allowing homeowners to put $5,000 toward their purchase upfront, Stewart said the Welcome Home program would help save first-time buyers more in the long run by decreasing their monthly payments.
The state loan would be repaid when homeowners get their federal tax credit.
“We’re expecting a very, very low default rate,” Stewart said, adding that the goal would be to pay back the state by August 2010.
MBIA designed the program along with the Montana Association of Realtors and nonprofit NeighborWorks Montana. It passed unanimously through the finance committee last week, and now goes to the Senate with the rest of HB645.
Stewart and other building and real estate officials hope the federal credit combined with the state efforts will buoy a flagging industry heading into its historic busy season.
“Homebuying is almost directly related to consumer confidence – if they don’t have confidence they might just wait to see how things go,” Stewart said. “Hopefully, this will help people get off the fence and into the market.”