Home sales in Contra Costa County rose in September to 1,607, up from 1,587 sold in August. Among the factors contributing to the increase is the Federal Income Tax Credit for first-time homebuyers, which is set to expire at the end of November.
Under the American Recovery and Reinvestment Act of 2009, a first-time home buyer purchasing a new home will receive a tax credit of 10% of the home's purchase price, up to a maximum credit of $8,000. The credit does not have to be repaid. Single taxpayers who make less than $75,000 per year or married taxpayers who make less than $150,000 per year qualify for the full credit. Although under the Act the credit will no longer apply to purchases after November 30, Congress is considering an extension. Furthermore, California is considering re-funding a $10,000 state tax credit for first time buyers, which had been available until the fund ran out of money in July.
These tax credits have helped combat the steady, but slowing, stream of foreclosures. As banks are encouraged by the presence of more buyers on the market, they are more willing to allow struggling homeowners some more time to find a buyer as opposed to going through the expensive foreclosure process.
One option banks have turned to is a short sale. In a short sale, the lender agrees to accept less than the mortgage principal in satisfaction of the mortgage if the borrower sells the home. If the federal and state governments continue tax credits for first time buyers, then short sales will likely grow in popularity amongst homeowners looking to avoid foreclosure.
