First-time homebuyers have been swarming into the Denver real estate market, eager to take advantage of a federal tax credit of up to $8,000 for the purchase of a home.
And with the program’s Nov. 30 deadline looming, real estate agents say they are busier than ever.
“The traffic has definitely increased since Labor Day,” said Andrew Darlington, a broker with Your Castle Real Estate. “A lot of buyers heard the tax credit was going to be extended and were waiting to see about their employment status and mortgage rates. Now they realize it hasn’t been extended, so they’re out looking.”
Through August of this year, about 1.4 million people nationwide have taken advantage of the tax credit, accounting for about 40 percent of all purchases, according to estimates by the National Association of Realtors and the National Association of Home Builders.
The financial incentive was just the push that 27-year-old Terra Maurer needed. She had planned to wait until she was 30 and had saved enough for a down payment before buying a home. But her mother said she would help with the down payment so Maurer could take advantage of the tax credit.
“That’s the only reason I’m buying a house,” said Maurer, who closed last week on a two-bedroom house near West Hampden Avenue and South Federal Boulevard. “Who could say no?”
The tax credit, part of the American Recovery and Reinvestment Act of 2009, is available only to first-time buyers. The IRS defines a first-time homebuyer as someone who has not owned a principal residence during the three-year period prior to the purchase.
The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000. Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.
The tax credit has had the biggest impact on lower-priced homes because first-time buyers generally look for move-in-ready homes priced less than $200,000, said Lon Welsh, managing broker of Your Castle Real Estate.
While the overall market showed an 18 percent drop in sales volume from January through August, the under $200,000, non-distressed segment had a 7 percent increase, according to Welsh’s analysis of Metrolist data.
It is also taking less time for starter homes to sell. The average number of days on the market declined from 107 days between January and August 2008 to 86 during the same period this year. In that same time, the average time on the market for Denver overall declined from 101 days to 100.
Keri Tomlin planned to wait until next year to buy her first house, but because of the tax-credit program, she is looking now.
“If I can close on time, it will be a nice bonus,” said Tomlin, who recently looked at about 15 houses in the span of a week.
Don’t wait, agents say
Some real estate agents said they feared their clients would wait too long and struggle at the eleventh hour to get deals closed. Most are advising clients to write contracts by Oct. 31.
“I would really advise people not to push this out to the very last hour,” Welsh said. “The title companies are going to be overwhelmed in the last week of November.”
Other brokers say buyers might have even less time. In the past, a 30-day closing was normal, but now it takes about 45 days because of new appraisal rules, said Sunny Banka, who is with Metro Brokers and is owner of Sunny Homes and Associates.
Builders of new homes are highlighting their offerings in an effort to attract buyers pursuing the tax credit.
Zane DeHerrera, a spokesman for MDC Holdings-Richmond American Homes, said it is not too late for first-time buyers to customize a new home and take advantage of the tax credit, but they must decide by Oct. 4.
“We don’t finish our homes,” DeHerrera said. “We hold them at the final stage of the construction process so buyers can still go to our gallery and choose their finishes.”
The National Association of Home Builders and the National Association of Realtors both support extending the tax-credit program to help reduce the supply of houses for sale and stabilize prices, but there has been no indication that will occur.
Margaret Jackson: 303-954-1473 or mjackson@denverpost.com