Silicon Valley REALTORS® welcomed the Federal Reserve announcement this week that it would purchase an additional $750 billion in Fannie Mae and Freddie Mac mortgage-backed securities and up to $300 billion in longer term Treasury securities.
"This is very good news for home buyers and homeowners because it would mean mortgage interest rates will continue to remain at historic lows," said Julia Keady, president of the Silicon Valley Association of REALTORS®.
The National Association of REALTORS® also applauded the move by the Federal Reserve. "NAR has been advocating since last fall that the Fed be more active in buying mortgage-backed securities. We are excited that the Fed acted on this provision of the stimulus plan that we offered to the government in November," said NAR President Charles McMillan.
The Fed decision to purchase more securities is certain to boost housing markets because greater numbers of home buyers will be able to purchase a home, and homeowners facing challenges will be able to refinance into better terms, according to the REALTOR® officials.
"We already are experiencing a great improvement in housing affordability due to historically low interest rates, and the Fed's move will push affordability conditions to the best levels in 40 years. In addition, continued low rates will lessen foreclosure pressure and help stabilize home prices sooner, as more American buy homes and draw down inventory," McMillan said.
The low interest rates, better affordability conditions and incentives like the $8,000 tax credit for first-time home buyers, as well as the state of California's offer of a $10,000 tax credit for purchase of a principal residence that has never been occupied will also help boost buyer confidence.
The homebuyer tax credit is one of 10 key provisions of the American Recovery and Reinvestment Act signed by President Obama into law on Feb. 17, 2009. The bill provides for an $8,000 tax credit that would be available to first-time home buyers for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009. The credit does not require repayment.
In the budget agreement signed into law last month by the Governor Schwarzenegger, California established a personal income tax credit for purchasers of a qualifying principal residence. The tax credit is capped at the lesser of $10,000 or 5 percent of the purchase price for the purchase of a principal residence that has never been occupied made between March 1, 2009 and March 1, 2010. The credit will be provided in equal amounts ($3,333 for the $10,000 credit) over the three successive taxable years beginning with the year in which the purchase is made. Qualifying residences must never have been occupied and must be eligible, after purchase, for the Homeowner's Property Tax Exemption. The taxpayer must live in the home as their principal residence for at least two years or be subject to liability for any tax credits received.
"Serious home buyers should to look into these opportunities," said Keady. "The federal tax credit sunsets December 1, 2009. Unlike the federal tax credit, the state has limited the total amount of credits that may be claimed to $100 million. Because of this provision buyers must make a tax credit reservation, and credits will be allocated on a first come first served basis."
Keady advises buyers to check with a knowledgeable and experienced REALTOR® about local market conditions and opportunities for home buyers.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.