|
Incentives motivate first-time buyers: Interest rates, tax credits inspire newcomers in housing market
(Paducah Sun, The (KY) Via Acquire Media NewsEdge) Jan. 11--Realtors and lenders are counting on rock-bottom interest rates and a $7,500 federal tax credit for first-time home buyers to pull consumer morale up by the bootstraps.
"Consumer-confidence polls are the worst ever," said Phil Weitlauf, U.S. Bank regional sales manager in Paducah. "But for the last four to six weeks, most of our loan originators are seeing more buying in what typically are two of the slowest months."
Weitlauf said the gain is modest: 20 to 30 transactions weekly in each of the western Kentucky, southern Illinois, southeast Missouri and northeast Arkansas areas that he oversees.
That compares with a maximum of five to eight typically during the holiday season.
Other customers are inquiring about credit, buying power, loan pre-approval and interest rates. Weitlauf said 30-year, fixed-rate mortgages are hovering at 5 percent, the lowest in his 35 years of lending.
"Interest rates are helping first-time buyers tremendously because there are young people who've been on the fence," said Leslie Heath, president of the Paducah Board of Realtors. "It's the perfect time to buy houses."
McCracken County listings keep growing because 148 fewer homes sold last year than in 2007, a drop of nearly 18 percent. The average sale price declined about $2,500 to just under $139,000 -- within the $75,000-to-$150,000 bracket Weitlauf called most attractive to initial buyers.
"There's a plethora of listings out there and a lot of motivated sellers," he said.
Heath placed the best homes for first-time buyers at under $200,000, noting there are plenty of them in the McCracken and Marshall County markets.
Tax credit
U.S. Bank is helping with a tax-incentive seminar later this month in Graves County, hit hard by the loss of Continental Tire, its largest industrial employer. Because roughly a third of mortgagees are first-time home buyers, a targeted tax incentive could help boost the regional market, Weitlauf said.
The credit, equal to 10 percent of the purchase price up to $7,500, applies to first-time home buyers between April 9, 2008, and July 1, 2009. It directly reduces federal income taxes.
Full credit is available for adjusted gross incomes of less than $75,000 for single people or $150,000 for married couples. The credit phases out at $95,000 for singles and $170,000 for couples.
But similar to an interest-free loan, the credit must be paid back in 15 years, starting two years after it's claimed. Payback is $500 a year for the full amount.
"I think the buyers have to be knowledgeable of the credit," Heath said. "Most of the time people start with agents and not banks, so it's up to the Realtors to get the word out."
Stable market
All real estate boards in the region reported declining home sales last year, ranging from about 8 percent in Murray-Calloway County to 21 percent in Mayfield-Graves County.
"Those sound like big numbers, but they really are not," said Steve Lacewell, director of the Murray State University Center for Banking and Financing. "Our market is much stronger than most areas of the country."
He said Murray enjoys relative stability because of the 2,500 people who work for MSU or Murray-Calloway County Hospital -- both more recession-resistant than most businesses.
Lacewell, who owns beachfront rental property in Alabama, said coastal areas and some Southwestern states enjoyed speculative housing booms, followed by plummeting markets.
"The ones who saw 20 to 40 percent increases in home prices per year while the bubble was growing are the ones now who are taking the biggest hits," he said.
Lacewell said key factors such as unrealistically high home prices and poor subprime lending led to a real estate "perfect storm" that garnered overwhelming national publicity.
"When a lot of lenders lost sight of sensible lending practices, banks in our area maintained sensible credit standards," Lacewell said.
Last year, Regions Bank targeted Florida and the Gulf Coast in refinancing or restructuring 103,000 residential first mortgages or home equity loans.
"We did very little of that in our area," said Barry Smith, Regions' west Kentucky market president. "We know the values have dropped some here, but nothing like Florida."
Despite the tire plant loss, Mayfield's FNB Bank has not seen eroding asset quality like banks in more volatile areas, FNB President Marty Nichols said.
"We're sort of a middle-of-the-road, slower-growth part of the world," he said. "That has served us well for years, and it's certainly serving us well now."
Nichols said western Kentucky reflects the state, which ranked ninth nationally in annual home price appreciation as of Sept. 30. Kentucky home values rose 1.46 percent, contrasting declines of 13 to 21 percent in Arizona, Florida, California and Nevada -- according to the Office of Federal Housing Enterprise Oversight. Nationally, home values dropped 4 percent.
Horizon
Heath said an increase in first-time buying would help the overall market by encouraging people in slightly larger homes to move up in value. For example, those with $150,000 homes might upgrade to $200,000 or more.
"When the market eases, you'll start to see the $300,000 market increase," she said. "I think things will start to improve by spring, unless something really crazy happens in the stock market."
Stock market stability and continued low interest are critical to a rebound, Nichols said.
"Certainly the last few weeks have been a more stable environment," he said. "But that needs to continue to grow for some weeks or months."
Weitlauf said higher interest is inevitable once home sales gain national momentum.
Lending standards will continue to tighten in 2009, which means larger down payments and less borrowing power relative to the price of homes, Lacewell said. That bodes well for people with good credit, but not for those on the edge.
"Hopefully we'll see consumer confidence come back up in 2009," Lacewell said. "But I think it will actually be 2010 before you see some real gains and a return to normal."
Joe Walker can be contacted at 575-8656.
To see more of The Paducah Sun, or to subscribe to the newspaper, go to http://www.paducahsun.com.
Copyright (c) 2009, The Paducah Sun, Ky.
Distributed by McClatchy-Tribune Information Services.
For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.
[ Back To Homepage ]
|
Home
Featured Article Archives
eNews
RSS FEED
