Tax credit for first-time buyers boosting home sales in Cape area

Brothers Luke Trankle, left, and Josh prime walls Wednesday in the new home of their cousin, a first-time homebuyer, in Cape Girardeau. Many first-time homebuyers are using the tax credit toward home improvements. (Kit Doyle) [Click to enlarge] [Order this photo]

When she learned of a tax credit that gives first-time homebuyers up to $8,000, she knew it was time to act.

Two months after viewing the home during an open house, Zyduck and her husband, John, were owners of a Scott City home. Without the tax credit, Zyduck said, it may have been difficult to purchase the home.

"We're only paying 44 more dollars each month than what we would have paid on our apartment," Zyduck said. "... So I'd tell first-time homebuyers thinking of whether to buy or not to go for it. It's certainly made our dream come true."

Zyduck is among the 1.4 million taxpayers nationwide, including 30,072 Missourians, who have filed for the credit under the American Recovery and Reinvestment Act.

Though the Cape Girardeau County Board of Realtors does not keep track of sales for first-time homebuyers, area real estate agents have noticed an upward trend in both the number of homes sold and the number of first-time homebuyers they have represented.

Because most closings occur near the end of the month, real estate agents said it is difficult to have an accurate count until early October. Bill Cole, a broker with Realty Executives of Cape County, expects to surpass last year's third-quarter pending sales numbers.

According to the Multiple Listing Service, a real estate advertising service, 280 homes were sold during the third quarter of 2008, compared to 270 this quarter as of Wednesday. Contracts are pending on another 200 homes.

Cole said the first-time homebuyers credit is a key contributing factor to the increase in sales and suggests homeowners take advantage of the credit before it's too late.

"Subject to a few limits, it's basically free money and creates instant equity for the first-time homebuyer," Cole said. "Combine that with the fact that it's largely a buyer's market and mortgage interest rates are incredibly low makes for a fantastic buying opportunity."

David Glastetter, a broker with ERA Cape Realty in Cape Girardeau, said a purchase by a first-time homeowner has a domino effect in the market.

"When a first-time homebuyer purchased a home, most sellers went on to purchase a more expensive house, which allows those sellers to move up as well," Glastetter said. "The program has what I would term a trickle-up effect. This program was a win for the sellers and a win for the buyers.

"The housing industry will be the industry that leads this country out of the current recession. The first-time homebuyer tax credit helped to get things started."

Debbie Jennings, a broker with Re/Max Realty Services in Cape Girardeau, said the interest of people who qualify for the credit has remained steady.

Homes that cost $80,000 or more qualify for the $8,000 credit, while the credit for homes costing less will be 10 percent of the total cost. The income limit for single taxpayers is $75,000 while the limit for married taxpayers filing jointly is $150,000. Those making more than that amount may not qualify. A first-time homebuyer is defined as someone who has never owned a house or hasn't owned one in the past three years.

However, homes must be closed by Nov. 30, so the time to qualify is running out.

"Unfortunately these first-time homebuyers are still very uneducated," Jennings said. "They've heard about this tax credit but still do not understand how it works."

Because a home takes 45 days to close, a contract should be signed by early October, Cole said.

"Delaying the purchase until the last minute might result in missing the deadline," Cole said.

While the credit is drawing to an end, more than a dozen bills have been introduced in Congress to extend the program. Senate Majority Leader Harry Reid endorsed the idea of extending the credit for six months.

U.S. Rep. Jo Ann Emerson of Cape Girardeau said she may be open to extending the credit.

"This two-year tax credit was part of the $787 billion stimulus, which I opposed earlier this year," Emerson said in a written statement. "If there is evidence that a refundable $8,000 tax credit targeted to first-time homebuyers is working to stabilize and grow our economy in southern Missouri, I will be more than happy to consider it -- but first I would have to see how much the legislation would cost taxpayers. This is a unique situation where, even if you don't owe any taxes, you're getting federal cash toward the purchase of a home."

Jane Perry, with Re/Max Divine Homes in Cape Girardeau, hopes the credit is extended to all homebuyers.

"How could an $8,000 buyer credit not be good for the market?" Perry asked. "... I would hope it would be extended beyond November and that the credit could be for any homebuyer, not just first-timers. That would be a huge incentive."

The Associated Press contributed to this report.

bblackwell@semissourian.com

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