Deciding to buy a house is never an easy decision and all of the bad news about the housing market can make even the most optimistic person skeptical.  So, if you've been wondering if now is the time for you to buy a home, it's time to take a look at the reasons why you might want to make your move soon.

Housing Inventory is Very High:

Right here in Fairfield County there are more houses and condos for sale in every price range than there have been in many years, so a buyer can be selective.  In some towns there are so many houses for sale that it will take over a year, at current sales rates, for all of the homes currently on the market to be sold (and new houses continue to come on the market every day).  High inventory also means that there is more competition, so (most) sellers realize that they need to be flexible in the price and terms they are willing to accept for their house.

Prices Have Come Down:

Fairfield County's housing market hasn't been as hard hit as other parts of the country, but prices have come down almost everywhere.  That means that whether you were planning on spending $200,000 or $2,000,000, you'll likely be getting more house for your money.  If you're worried that the price decline will mean that your house will lose value after you buy it - don't. Real estate is an investment, but it's an investment you live in, so how much you gain on the investment is important, but having a home of your own to enjoy is priceless. 

Foreclosures & Short Sales are Everywhere:

Almost 1 in 3 homes for sale in the area are either already a Bank Owned Foreclosure or a possible Short Sale.  If you have a lot of patience and can be flexible about your moving dates, then you should consider looking into a Short Sale or Foreclosure property.  I mention the need for patience, because both Short Sales and Foreclosures usually require more time and paperwork than a typical home purchase.  With a Short Sale, you are at the mercy of the bank and may have to wait months to find out whether or not they will accept the price that you've offered for a house.  And with both types of deals, you're likely to be buying the house in "as-is" condition.  So you want to be sure to hire a licensed, experienced Home Inspector who will give the house a thorough inspection and let you know what work, if any, the house will require.  In either case, you want to be sure to choose a Buyers' Agent and Attorney who are experienced in dealing with these types of deals so that they can walk you through the process and keep on top of all of the details.

Mortgage Rates are Still Low:

Fixed Rate mortgages are still hovering around 6% for a 30 year term, which if you compare it to the rate that you might be paying on other debt, such as credit cards, is really good for the long term.  Talk to a mortgage broker or your local bank to find out what type of mortgage programs they are offering and how much of a mortgage you are qualified to borrow.  You may be surprised to find out that you could buy a condo or house and have mortgage payments that are less than your current rent.

Now that you've got a grasp of the general reasons why now is a great time to be buying a house, you need to think about your personal situation.  Ask yourself these questions to help determine whether now might be the right time for you to buy:

1. Do you plan to stay in the same area for at least 3 years?
2. Do you have any savings you can use for a down payment?
3. Are you confident that you'll stay employed, with the same level of income, for at least another year (longer is always better)?
4. Do you have other debts that you could/should pay off first?
5. Do you have enough income to pay the mortgage, taxes, insurance, common charges (for condos) and maintenance costs without stretching yourself too thin?
6. Are you ready to be a homeowner?

If you can answer all of those questions in the affirmative (except number 4 - you should pay down other debts, if possible, before taking on more debt) and feel comfortable that buying your own home will enhance your life, then go for it.  Find a dedicated Buyers' Agent who is ready to guide you along the path to home ownership and get ready to start your journey.

If you have always wondered how energy efficient your home really is, then now is a great time to find out.  The Connecticut Energy Efficiency Fund  has teamed up with local electric and natural gas providers to provide comprehensive home energy audits to their residential customers (both homeowners and renters).  If you are a customer of CL&P, UI, Southern Connecticut Gas, Yankee Gas or Connecticut Natural Gas Company and you use either electricity or natural gas to heat your home, you are eligible to receive this service for free.  If you heat with oil, then you will have to pay a co-pay for the service (normally $300, it's just $75 for a limited time).  Either way, this is a great value.

The audits are performed by a authorized contractors who will spend up to 4 hours going through every inch of your home to find any possible energy leaks and fix them.  As part of the overall service they will:

• Seal up any drafts or leaks
• Install energy-efficient light bulbs, shower heads and faucet aerators
• Insulate water heaters and pipes
• Provide tips on how to improve your overall energy usage
• Let you know if you're eligible for rebates on energy-efficient appliances or insulation

Funds for the program are limited, so if you're interested in getting your home audited, you should act soon.  You can find more information and an application by going to your electric or gas company's website.

Our home is getting it's energy audit later this month, so I'll be sure to report on what I learned.  And if you have any great energy saving tips, feel free to share them here in the comments.

According to some generational classifications, my husband and I would be considered members of Generation X.  But lately, with the changes we've made in our lives I've been wondering if we've moved from Generation X to a new generational label.  The problem is, I can't decide whether we're now Boomerangs, Sandwiches or perhaps a Boomerang Sandwich.  Here's why...

At the end of the summer my husband, our 4-year-old son and I moved from our condo to a house.  Nothing unusual with that, except that the house we chose to move to is the house where my husband grew up.  Oh, and my mother-in-law still lives there.  So now we have three generations under one roof (a roof that happens to belong to my mother-in-law).

Here's where it gets complicated...we're grown children living back in a parent's home after living independently, which is a key trait of the Boomerang Generation.  But, we did it to help my mother-in-law, who, while still very healthy, young & independent, did not want to consider having to ever leave the home she's lived in for 26 years.  So, we're caring for our young child and our aging parent - Sandwich Generation.  See how I've managed to get an identity crisis?

That's why I am starting to think of my husband and I as a "Boomerang Sandwich".  On one level, we moved back "home" because it made financial sense for us (just like a Boomerang): a beautiful home in a family-friendly neighborhood with great schools for a lot less money than it would have cost if we chose to buy a similar house on our own.  But we didn't have to move from where we were.  We moved because we wanted to give my mother-in-law the ability to stay in her home for as long as she wishes, without worrying about rising taxes, increased utility bills or expensive home maintenance. 

It turned out to be the best decision for all of us.  She's happy and secure in her home.  And we feel right at home, too.

Oh, and if you're wondering how we keep our sanity being so close to each other.  Well, it's easy.  She's got a fabulous in-law suite that's connected to the living room and her music room (formerly known as the dining room) with a separate entrance from outside.  And we've got a door that divides our side of the house from hers.  Separate spaces where we can each be comfortable and live our own lives, yet be right next door when one of us needs the other.  It really is the best of both worlds.  I guess being a "Boomerang Sandwich" isn't so bad after all.

A wonderful mortgage broker I know, Nima Rezvan, with LADD Financial , recently posted a comprehensive article on Facebook that answers the most Frequently Asked Questions about the First Time Home Buyer Tax Credit.  With his permission, I'm reprinting it in full below.  If you have any further questions, feel free to post a comment or contact him directly.

Nima Presents: Frequently Asked Questions About the First-Time Home Buyer Tax Credit

The Housing and Economic Recovery Act of 2008 authorizes a $7,500 tax credit for qualified first-time home buyers purchasing homes on or after April 9, 2008 and before July 1, 2009. The following questions and answers provide basic information about the tax credit. If you have more specific questions, we strongly encourage you to consult a qualified tax advisor or legal professional about your unique situation.

1. Who is eligible to claim the $7,500 tax credit?

First time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after April 9, 2008 and before July 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs.

2. What is the definition of a first-time home buyer?

The law defines "first-time home buyer" as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse. For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer.

3. How do I claim the tax credit? Do I need to complete a form or application?

Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. No other applications or forms are required. No pre-approval is necessary; however, prospective home buyers will want to be sure they qualify for the credit under the income limits and first-time home buyer tests.

4. What types of homes will qualify for the tax credit?

Any home purchased by an eligible first-time home buyer will qualify for the credit, provided that the home will be used as a principal residence and the buyer has not owned a home in the previous three years. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats.

5. Instead of buying a new home from a home builder, I have hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?

Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been "purchased" on the date the owner first occupies the house. In this situation, the date of first occupancy must be on or after April 9, 2008 and before July 1, 2009.

In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date.

6. What is "modified adjusted gross income"?

Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine "adjusted gross income" or AGI. AGI is total income for a year minus certain deductions (known as "adjustments" or "above-the-line deductions"), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.

To determine modified adjusted gross income (MAGI), add to AGI certain amounts such as foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions and deductions for higher-education costs.

7. If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?

Possibly. It depends on your income. Partial credits of less than $7,500 are available for some taxpayers whose MAGI exceeds the phase-out limits. The credit becomes totally unavailable for individual taxpayers with a modified adjusted gross income of more than $95,000 and for married taxpayers filing joint returns with an AGI of more than $170,000.

8. Can you give me an example of how the partial tax credit is determined?

Just as an example, assume that a married couple has a modified adjusted gross income of $160,000. The applicable phase-out to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $7,500 by 0.5. The result is $3,750.

Here’s another example: assume that an individual home buyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $7,500 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,625.

Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.

9. Does the credit amount differ based on tax filing status?

No. The credit is in general equal to $7,500 for a qualified home purchase, whether the home buyer files taxes as a single or married taxpayer. However, if a household files their taxes as "married filing separately" (in effect, filing two returns), then the credit of $7,500 is claimed as a $3,750 credit on each of the two returns.

10. Are there any circumstances for which buyers whose incomes are at or below the $75,000 limit for singles or the $150,000 limit for married taxpayers might not be able to claim the full $7,500 tax credit?

In general, the tax credit is equal to 10% of the qualified home purchase price, but the credit amount is capped or limited at $7,500. For most first-time home buyers, this means the credit will equal $7,500. For home buyers purchasing a home priced less than $75,000, the credit will equal 10% of the purchase price.

11. I heard that the tax credit is refundable. What does that mean?

The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.

For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that taxpayer qualified for the $7,500 home buyer tax credit. As a result, the taxpayer would receive a check for $6,500 ($7,500 minus the $1,000 owed).

12. What is the difference between a tax credit and a tax deduction?

A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $7,500 in income taxes and who receives a $7,500 tax credit would owe nothing to the IRS.

A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $7,500 in income taxes. If the taxpayer receives a $7,500 deduction, the taxpayer’s tax liability would be reduced by $1,125 (15 percent of $7,500), or lowered from $7,500 to $6,375.

13. Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?

No. The tax credit cannot be combined with the MRB home buyer program.

14. I live in the District of Columbia. Can I claim both the DC first-time home buyer credit and this new credit?

No. You can claim only one.

15. I am not a U.S. citizen. Can I claim the tax credit?

Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of "nonresident alien" in IRS Publication 519.

16. Does the credit have to be paid back to the government? If so, what are the payback provisions?

Yes, the tax credit must be repaid. Home buyers will be required to repay the credit to the government, without interest, over 15 years or when they sell the house, if there is sufficient capital gain from the sale. For example, a home buyer claiming a $7,500 credit would repay the credit at $500 per year. The home owner does not have to begin making repayments on the credit until two years after the credit is claimed. So if the tax credit is claimed on the 2008 tax return, a $500 payment is not due until the 2010 tax return is filed. If the home owner sold the home, then the remaining credit amount would be due from the profit on the home sale. If there was insufficient profit, then the remaining credit payback would be forgiven.

17. Why must the money be repaid?

Congress’s intent was to provide as large a financial resource as possible for home buyers in the year that they purchase a home. In addition to helping first-time home buyers, this will maximize the stimulus for the housing market and the economy, will help stabilize home prices, and will increase home sales. The repayment requirement reduces the effect on the Federal Treasury and assumes that home buyers will benefit from stabilized and, eventually, increasing future housing prices.

18. Because the money must be repaid, isn’t the first-time home buyer program really a zero-interest loan rather than a traditional tax credit?

Yes. Because the tax credit must be repaid, it operates like a zero-interest loan. Assuming an interest rate of 7%, that means the home owner saves up to $4,200 in interest payments over the 15-year repayment period. Compared to $7,500 financed through a 30-year mortgage with a 7% interest rate, the home buyer tax credit saves home buyers over $8,100 in interest payments. The program is called a tax credit because it operates through the tax code and is administered by the IRS. Also like a tax credit, it provides a reduction in tax liability in the year it is claimed.

19. If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?

Yes. The law allows taxpayers to choose ("elect") to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.

20. For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?

Yes. If the applicable income phase-out would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount.

21. Is there any way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2008 tax return?

Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the future home buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the down payment. Buyers should adjust their withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.

What Happened in September?

Well, if August was vacation month, then everyone must have spent September focused on getting back to school and work.  Home sales slowed again this month, with both overall the Median Sale Price and the number of Homes Sold in the County going down over August.  But, that's part of the normal sales cycle for our local Real Estate Market.  September is always a slow down after the Summer market, so it's not too worrying.

Here are the overall statistics:

Single Family Home Sales Statistics

 September 2007 - All of Fairfield County
Median Sales Price: $527,000
# of Homes Sold: 549
Average Time on Market: 99 days

Some Good News - Inventory & Absorption Rates

The good news is that the average number of homes sold per month (absorption rate) remained almost level with an average of 463 homes sold per month through September, versus 465 homes sold per month through the end of August.  The rate is 29% lower than the number of homes sold per month for the first 9 months of 2007, which has been the trend most of this year.  However, in 2007 the drop in number of homes sold from August to September was 3% and this year it stayed steady, which is a good sign.

On the Inventory side, the number of homes actively for sale has remained almost level as well, with 5,463 homes currently for sale.  That's still almost 12 months of inventory, which means we're in a strong buyers' market.

Should You Stay or Should You Go?

All of the bad news in the media can make even the most optimistic person worry about whether or not now is a good time to buy or sell a home.  It really depends on many factors that are unique to each individual or family, such as:

• Do you have to (or want to) move right now?
• Are you in a stable job with stable income?
• How is your credit history?
• Do you have other debts (car loans, credit cards, etc.) that you can pay off first?
• Do you plan to stay in your next home for at least 3 years?

If the answers to most of those questions are positive, then you're likely a good candidate to buy a home, especially if you're currently renting.  Bargains are everywhere and buyers are snapping them up, which is why the median sales prices keeping going down in many towns. 

On the selling side, if you have:

• A desire (or need) to move (to downsize, buy a larger home or go to a different town or state)
• Enough equity in your home to be flexible about your sales price AND
• Your home will sell for at or below the median sales price for your town

Then you should seriously think about selling now.  You may get less for your current home than you would have in the past, but you'll also pay less for the house that you're buying so you're coming out ahead of the game.

Finally, if you're thinking about investing in Real Estate, now might be the right time to jump in and buy your first property.  There's a real need for rental properties (condos, apartments & houses) because of the people who can no longer qualify for a mortgage or have lost their homes due to foreclosure (theirs or their landlords).  You can buy the properties at much lower prices now and the mortgage rates for investment properties are still low.  But be warned - you need to have enough financial reserves to be able to cover all of the expenses on the rental property, and any unexpected maintenance, before buying the property.  Not only will many banks want to see that you have funds available before they give you a mortgage, but you'll have piece of mind knowing that if a tenant fails to pay rent or your property is vacant for any period of time, it won't be a burden on you financially.

As always, if you're thinking about buying or selling a home or just want to keep an eye on the market, feel free to call me at 203-952-4899; email me at Marcie@BersonTeam.com; or post your comments here on my blog.  It's my pleasure to help you any way I can.

Town by Town Single Family Home Sales Statistics

*Data compiled from listing information in the Greater Fairfield County CMLS entered as of 10/10/08.  Does not include private sales or sales listed in the Greenwich, Darien or New Canaan MLS services.  Always verify any information that is critical to your buying decision before acting.

The month of September has been crazy for me.  Between moving to a new house, going on a wonderful family vacation and Rosh Hashanna, my schedule is completely out of whack.  Many things, including this blog, have fallen by the wayside, but I'm getting back to business.

Early next week I'll be posting my regular Monthly Market Update and a special Quarterly Market Trend Analysis to see where the market has been so far this year. 

Now as far as where the market might be going - well that's something I'm going to try and tackle also.  The only thing I know for sure is that all of the Wall Street wackiness is going to have a definite effect on Fairfield County.  Not only do many financial, banking and Wall Street-related firms have a presence here, but many people living here are (or were) employed by these firms so when they aren't doing well, it starts to cause problems in our local markets. So I'm going to weed through the national and local news stories to find information to help make sense of what's going on and how it relates to the local real estate market.

Along the way, I'll continue to highlight any other news stories or items that I think would be of interest.  Thanks for your patience during my short hiatus.  I promise to have more good information coming along for you soon.

It seems like the local Real Estate Market decided to go on vacation in August.  Home sales for the month were slower than July and the average sales price dropped a bit below where it was in June.  This isn't unusual for the end of the Summer since so many people plan their moves around the school year and many local schools started before Labor Day this year.  Despite the overall drop in the market there were some towns that had increases in sales prices last month (indicated in blue in the table below).  Here are the overall statistics:

Single Family Home Sales Statistics

 August 2007 - All of Fairfield County
Median Sales Price: $580,000
# of Homes Sold: 912
Average Time on Market: 93 days

Is the Market Starting to Level Off?

The number of homes sold per month (absorption rate) went up to an average of 465 for the year-to-date.  It's still much lower than the first 8 months of 2007 when the average was 674 homes per month.  But it's a good indicator that the local housing market is still following a fairly normal sales pattern with sales increasing through the Summer.

Overall inventory is also down from last month with 5,432 homes actively for sale in the County.  At the current absorption rate, that translates to almost 12 months of inventory, so it's still a Buyers' Market, but there's1 month less of inventory than in July.

What Does This Mean for You?

Fall and Winter are typically slow home buying seasons, so if you are thinking about buying a home, it would be a good time to think about making your move.  You'll still have plenty of homes on the market to see and there will be less competition from other buyers.  Also the Mortgage Rates have started to go down again since the government "take-over" of Fannie Mae and Freddie Mac, making loans more affordable and more loans available.  Lending criteria is still very strict so be sure to talk to a trusted mortgage adviser to be sure that you can qualify for the type and amount of loan you want before you fall in love with a new home.

Town by Town Single Family Home Sales Statistics

*Data compiled from listing information in the Greater Fairfield County CMLS entered as of 9/09/08.  Does not include private sales or sales listed in the Greenwich, Darien or New Canaan MLS services.  Always verify any information that is critical to your buying decision before acting.