The $8,000 Federal Tax Credit has proven to be extremely popular. According to Realtor.com, the most visited real estate website in the U.S., 10.8% of buyers say that this and other state incentives are the most important reason motivating them to buy. The IRS reports that about 1.14 million buyers have filed for the $8,000 first-time tax credit, and expect many more buyers to file paperwork to qualify for the credit when they submit their 2009 tax return.
However, tax credits don't deserve all the attention. More importantly, the key driver for first-time home buyers today is the improved affordability throughout the country. In July of 2009, the National Association of REALTOR®'s (NAR's) Affordability Index was 36% higher than in July 2008. A typical family earning a median household income has to use 15.8% of their gross income to pay for housing, which is significantly lower than the "traditional allocation" of 25%. On top of improved affordability (median price/median household income) mortgage interest rates are still at a historical low point (below 6% for a 30-year fixed rate loan).
The deadline to qualify for the $8,000 First-time Homebuyers Tax Credit is fast approaching. Buyers have to CLOSE their purchase by November 30th, 2009 to qualify. If you know any friends or relatives who have been thinking about buying, please tell them to hurry. There is no guarantee that the Government will extend or increase this incentive beyond December 1st.