The first-time home buyer tax credit is making a difference in local real estate sales.
Mary Martin, an agent with Network Real Estate and president of the Wilmington Regional Association of Realtors, said an estimated 30 to 35 percent of area home sales involve either first-time buyers or qualifying current homeowners taking advantage of a $6,500 tax credit to upgrade into a new house.
“We’re trying to get the word out that the credits are out there,” Martin said.
The Worker, Homeownership and Business Assistance Act of 2009 was recently extended by Congress through April 30. It provides for a tax credit of up to $8,000 for qualified first-time buyers purchasing a principal residence. In cases where a binding sales contract is signed by April 30, a home purchase completed by June 30 will qualify.
February sales of single- family homes in New Hanover County totaled 278, at an average price of $240,000, according to the WRAR. That compares to 252 in February 2009, at an average price of $234,000.
Some potential first-time home buyers held back during the first phase of the tax credit program because they were locked into leases, Martin said. When the tax credit was extended in January, more renters could take advantage because their leases were up.
Others who may not be considered typical first-time home buyers also used the tax credit. One example is David and Joyce Toppin, a retired couple who recently purchased a home in the Carriage Hills subdivision.
David Toppin said other factors were also in play, in particular the city of Wilmington’s participation in the Home Ownership Pool program, which offers qualified parties in low- to moderate-income households the opportunity to become homeowners. The Toppins received an interest-free loan that paid for 30 percent of their new home through the program, which is overseen by U.S. Department of Housing and Urban Development.
“The $8,000 was an indirect incentive. The incentive for us was to be able to partake in the (HOP) program,” David Toppin said.
The Toppins rented for more than three years in Wilmington after moving here from another state.
The tax incentive helps first-time homebuyers with expenses like closing costs and fees, Toppin said.
“It’s a good plan, but I don’t see it as making it possible for first-time homebuyers such as ourselves to purchase a home,” he said.
Woody Hall, senior economist with the Center for Business and Economic Services at the University of North Carolina Wilmington Cameron School of Business, cautioned the tax credit may create unforeseen challenges for some first-time buyers.
“The concern I would have with any kind of tax credit is it reduces the purchase price of the house,” Hall said. “Any time you make something cheaper artificially, you take on more obligation than you probably should.”
But an offsetting factor is the difficulty nonqualified home buyers have in obtaining a loan.
“Easy credit is a thing of the past,” Hall said.
Though Martin says the incentives for home buyers have helped spur sales, Hall thinks the long-term effect isn’t clear yet.
The original tax credit and the extension “probably stole some sales in the future,” Hall said. “I think the real question is what happens when the stimulus goes away.”
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