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REALTOR ® Study Reports that over Half of Homes Purchased in Massachusetts in 2009 were Made by First-Time Home Buyers

WALTHAM, Mass. – February 10, 2010 – A new study on Massachusetts home buyers and sellers found that over 50 percent of all homes purchased in the Bay State in 2009 were made by first-time home buyers (compared to 47 percent nationally).  This is up five percent from 2008.  The data is from the 2009 Massachusetts Profile of Home Buyers & Sellers, compiled by the National Association of Realtors® (NAR), on behalf of the Massachusetts Association of REALTORS® (MAR).

“The study echoed what many members had been hearing from their clients that the combination of more affordable prices, historically-low interest rates and the availability of the first-time home buyer tax credit all worked together to get first-time home buyers back into the market,” said 2010 MAR President Kevin Sears, a broker/co-owner of Sears Real Estate in Springfield.  “At the same time, because it was a buyer’s market in 2009, the study found that over 90 percent of home sellers chose to work with a real estate broker to help sell their home.” 

The study found that while oil prices had come down from the highs of 2008, commuting costs were still considered as very or somewhat important by 81 percent of buyers when considering which home to purchase.  This was down from 84 percent in 2008.

While the number of foreclosed homes in 2009 went down compared to 2008, the number of buyers who bought a home went up. According to the study, 10 percent of buyers bought a foreclosed home, which is up 7 percent from 2008, but the same as the national average. 
 

The median income of buyers (which is reported from 2008 household data) was up to $94,800 compared to $88,100 in 2007 and higher than the $73,100 national median income.  Fifty-nine percent of home buyers were married couples, 15 percent single females, 14 percent single males, and 12 percent unmarried couples.  Thirteen percent of home buyers reported they were born outside of the United States compared to nine percent nationally.
 

The median age of the first-time home buyer was 30, which was down from 31 years of age in 2008.  Sixty-one percent of first-time home buyers were between 25 and 34 years old, while 18 percent were 35-44 years.  Only seven percent were 18-24 year years.  First-time home buyers had a median income of $84,600 compared to $61,600 among first-time home buyers nationally.
 

Despite stricter lending requirements in 2009, 90 percent of buyers still financed their home purchase (94 percent of first-time buyers compared to 84 percent of repeat buyers).  Savings was the chief source of the downpayment for 76 percent of first-time buyers with 48 percent of repeat buyers using proceeds from the sale of their primary residence. 
 

Fifty-four percent of all buyers believe that their home purchase was a better financial investment than stocks (compared to 47 percent in 2008); with an additional 29 percent of buyers feeling their home purchase was at least as good an investment as stocks. 
 

The study showed that 92 percent of Massachusetts home sellers chose to work with a real estate professional, which is seven percent higher than the 85 percent national average.  Only five percent of sellers attempted to sell their home without the assistance of an agent or broker.  This is much lower than the national share of 11 percent.  Of those “For-Sale-By-Owner” (FSBO) sellers, about 20 percent knew the buyer prior to the sale.
 

The median age of the home seller was 44 years (which is down from 47 years in 2008) and they had a median income of $113,500.  The typical seller owned their home for eight years.  Fifty-percent of home sellers reported the main reason for deciding to sell was either a change in family situation (e.g., marriage, birth of child, divorce) or their home was too small.  Only six percent reported selling their house because they could not afford the mortgage and other expenses of owning a home.
 

When it came to selling, 38 percent of home sellers did not reduce their asking price before the home was sold.  Recent sellers typically sold their home for 94 percent of the listing price.  Twenty-three percent of sellers did offer incentives to attract buyers compared to 42 percent nationally.  Most often that assistance was applied to closing costs and home warranty policies.

NEW TAX CREDIT EXTENSION GUIDELINES


1. Who are eligible homebuyers? Has eligibility been expanded to include existing homeowners?

Eligible homebuyers now can take advantage in two categories:
The first-time homebuyer, a person who has not owned a principal residence in the past three years (subject to income restrictions); 

The other credit is for long-time residents of the same principal residence, someone who has owned and occupied a home as the principal residence for any consecutive five-year period during the last eight years (subject to the new income ceilings). You do not have to sell your existing home to get the credit (you can keep it or sell it), but you must make your new home your principal residence for at least the next three years to avoid penalty.

Finally, the date of purchase has been extended to April 30, 2010, which means a binding P&S agreement is executed by April 30, with a closing date of no later than July 1, 2010.

2. What are the new maximum income levels?

For first-time homebuyers, the MAGI (Modified Adjusted Gross Income) limit is now $125k for singles and $225k for couples.
For long-time residents of the same principal residence the limits are the same.

3. Has the credit amount been increased?

No. But the maximum credit amount is different depending on whether the taxpayer is a first-time homebuyer or a non-first-time homebuyer.
For first-time homebuyers the full credit is still $8,000 ($4,000 if married filing separately).
For long-time residents of same principal residence the full credit is $6,500 ($3,250 if married filing separately).

The homebuyer will get this money in the form of a federal tax refund.
Although this is still a true credit as opposed to a loan (recall the 2008 version), recapture or repayment would still be required if you sold your home within 36 months of purchase.

4. What housing qualifies as a principal residence purchase?

As before, single-family homes, condos, townhouses, and co-ops qualify so long as they are used as the taxpayer’s principal residence.
Although multi-family properties may qualify for the credit; the amount is based upon the value of the unit that will be the principal residence and not the entire building. For example, with a $130K two-family, the credit is only based upon the value of one of the two units or $65k, 10% of which is $6,500.
As with the previous rules, sales between immediate family members are ineligible.
It is also important to note that the purchase price of the home cannot exceed $800k.

Homes Sales Up 63% in November, 2009

According to the Massachusetts Association of REALTORS® (MAR), single-family home sales were up a record 63.1 percent compared to last year, November 2008, as buyers expected the first-time homebuyer tax credit to expire at the end of the month.  That tax credit has now been extended to April 2010. 

Median prices were up 0.7 percent compared to last year at this time, while condominium median prices were essentially flat going down to 0.4 percent. 

November pending sales (homes put under agreement) were up 15 percent from the same time last year.  The even better news is that Pending sales have now gone up for six straight months. 

What to Do When Faced With Foreclosure

The Pro’s of Getting a Home Inspection

When considering buying a new home, don’t cut corners when it comes to getting a home inspection. National statistics have reported that upwards to 40% of all previously owned homes on the market have been found to have at least one serious defect.  Not that having the defect means matters look grim; in fact, it’s to be expected; however with the cost of housing, the buyer needs to beware of exactly what they are purchasing and what underlying costs they will incur from fixing up a problem that wasn’t theirs.

According to Bloomkey.com, what you don’t know about home inspections can hurt you.  Bloomkey offers a home inspection tip sheet on their website, and lists the following as top things to note during a home inspection:

1. Rotting wood or siding
2. Roofing problems
3. Wiring and electrical
4. Poor heating and cooling systems
5. Damp or wet basement
6. Attic spaces
7. Defective plumbing
8. Masonry work
9. Structural/foundational problems

For any of the above problems, the costs incurred could range from incidental to substantial.  Once aware of a problem, you may want to ask your agent to provide a stipulation for renegotiating or even canceling the contract when a home inspection unearths a serious defect in the home. 

Helpful information for the Buyer

 
During this economy, it’s imperative that you know what to do as a homebuyer. The tips below can help you to save money and time, as well as give you a piece of mind!

1. Make sure you get pre-approved for a mortgage before making an offer.
Showing up with a pre-approval letters gives you a firm standing that you’re a serious buyer and have the backing to purchase the property.

2. Know when to quit.
Keep your head. Reacting with emotion can damage your chances of getting the home you desire. Don’t get caught up in a bidding war for the sake of being the winning bidder or have yourself living in a home in a certain area before you get a signed offer.

3. Put aside enough money to cover closing costs
Find out a Good Faith Estimate of the loan-related fees from your lender. Ask your real estate agent to put together a list of expenses for you of other costs you may be required to pay. Don’t go into the closing blind to what other costs you may have to pay or else you may end up foregoing a new carpet for a month’s mortgage!

4. Try to have coordinating move in/move out dates
Try avoiding moving all your things into storage while you live with relatives for two weeks. No one likes to move twice!

5. Home inspection? Definitely!
No home inspection could mean finding a leak months later that could have been fixed before you moved in!