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What an $8,000 tax credit could mean for home sales

By Rolf Boone | The Olympian • Published March 29, 2009

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Some South Sound residents are taking a serious look at buying a home for the first time, enticed by a potential $8,000 tax credit.

The tax credit was approved as part of recent federal legislation to stimulate the housing market, called the American Recovery and Reinvestment Act of 2009.

It follows a similar piece of legislation last year that offered a $7,500 tax credit for new and recent property buyers. Unlike last year's program, the $8,000 tax credit doesn't have to be repaid, said Judy Monahan, a regional spokeswoman for the Internal Revenue Service.

First-time homebuyers and those who haven't owned property in the past three years can qualify for the program if they buy a house before Dec. 1. Buyers then can receive 10 percent of the purchase price of the house, up to $8,000, after filing their 2009 taxes, according to the IRS.

If the homeowner owes money on their income taxes at year's end, that amount would be subtracted from the tax credit; if the homeowner is expecting a refund, it would be in addition to the tax credit, Monahan said.

The Windermere Olympia real estate office has touted the new tax-credit program on its reader board for a month. Although interest in the program is off to a slow start, it should do better than last year's $7,500 no-interest loan, Windermere Olympia office owner Steve Garrett said.

"This is a step in the right direction," said Garrett. He added that the new tax-credit program, low mortgage interest rates and softening house prices make it a strong buyer's market.

"It's a very attractive combination," he said.

First-time homebuyers familiar with the program are taking action.

As soon as Olympia residents Michael Carey and his wife, Stephanie, learned about the program, they made a "spur-of-the-moment" decision to start shopping for a house, he said.

The couple and their daughter have been renters for two years, paying nearly $900 a month for a two-bedroom, two-bathroom apartment in Olympia. Michael Carey, 26, thinks they could afford up to $1,300 for their monthly mortgage payment, part of which they could pay with the tax credit. They also plan to use the money to pay down debt, such as school and car loans, he said.

"We definitely plan to buy this year," he said.

An additional factor helping first-time buyers is the changing landscape of the Thurston County housing market, Greene Realty Group real estate agent Blake Knoblauch said.

A recent check of the Northwest Multiple Listing Service showed 39 properties for sale for less than $200,000 in the county. Two years ago, that market did not exist, Knoblauch said. "We're talking decent houses."

Newlyweds Tara and DJ Lucero of Rochester say they have taken their house search more seriously because of the new tax-credit program. The couple have been living in a duplex since October and are shopping for a three-bedroom house that is move-in ready, Tara, 24, said. They'd like to find a house between 1,000 and 2,000 square feet for about $200,000, she said. They, too, envision spending the tax credit on paying off bills and on their new house.

"It will be money well spent," she said.

Lending, though, likely isn't going to be affected by the new tax-credit program, Heritage Bank President and Chief Executive Brian Vance said. Although he thinks it is a positive development for the housing market, the bank will continue to do its due diligence when it comes to borrowers, still evaluating their credit scores and requiring a down payment, Vance said.

"We're not looking at any change in lending criteria in that regard," he said.

Rolf Boone can be reached at 360-754-5403 or rboone@theolympian.com.