The federal tax credit for first-time buyers is “a huge motivator” for these buyers, and they may end their search if the Nov. 30 deadline arrives and they still have not closed on a deal.

Timing is everything for many first-time buyers today. For those who purchase a home this year, the tax credit is for 10% of the purchase price, up to $8,000. Those who have owned a home in the past three years aren’t eligible. Buyers also have to meet eligibility requirements regarding income; the current credit begins to phase out for singles who make more than $75,000 and couples who make more than $150,000.

Unless it is extended, this credit will expire on Nov. 30. We are seeing an increase in buyers wanting to get closed prior to the tax credit closing deadline. there is also an increase in sellers wanting to get their homes on the market and closed by this deadline.

Some real-estate agents and mortgage brokers are recommending that first-time buyers close no later than the week before Thanksgiving to ensure that no holiday-related office closings or abbreviated schedules interfere with the process. That means finalizing a purchase on or before Nov. 20. In fact, to make sure you can take advantage of the credit, it’s probably best to go under contract no later than the first or second week of October.

The National Association of Realtors reports that it’s taking about two months to complete a home sale in the current market, as lenders scrutinize borrower paperwork and issues with appraisals pop up. In short, first-time buyers probably need to select a property and make an offer by the end of this month. But rushing to meet the deadline is a double-edged sword. The purchase of a home—let alone your first one—isn’t a decision that should be taken lightly.

For buyers who don’t make the deadline, there is a chance the credit will be extended. There are at least 20 bills drafted regarding the credit; one-third of them have been introduced recently. Some proposals would not only extend the first-time buyer credit into next year, but would also expand it to include all home buyers, remove income restrictions and raise the maximum amount of the credit, up to $15,000.

By including all buyers, there could be more of a ripple effect as more Americans spend money on moving vans, lawn equipment — any items or services associated with making a move. NAR has been lobbying heavily for the extension. “The first priority is going to be to renew the $8,000 credit, but we have some good arguments for expanding it,” said Jerry Giovaniello, senior vice president and chief lobbyist for NAR. He argues that the credit doesn’t cost much but has a huge impact.

There is growing Capitol Hill support for the extension of the credit. Senate Majority Leader Harry Reid, D-Nev., said it needs to be extended by the end of the year, according to a spokesman from his office. And Washington Research Group, a unit of securities firm Concept Capital, recently put the chance of extension at 60 percent.

Yet with Congress currently focusing on other issues, and concerns about the country’s rising deficit, some wonder how difficult it will be for housing to garner attention anytime soon.

If you’re a first-time buyer, however, waiting is a gamble. What you have in front of you now is a tax credit. After that, you don’t know what you have.

NAR estimates that about 1.8 million to 2 million first-time buyers will take advantage of the tax credit this year, and says that roughly 350,000 sales wouldn’t have taken place without the credit.

The federal Gov. is giving a tax credit in the amount of 10% of the sale price or 8000.00 which ever is less.

The state of California is giving a tax credit in the amount of 5% of the sale price or 10,000.00 which ever is less.

Neither is a loan nor does it have to be repaid.

What’s the catch, you ask? Well the federal tax credit has a limit on the income amount on the buyer can earn 75,000 for a single taxpayers and 150,000 for married taxpayers. Also, they must be first time buyers and purchase the home between 01/01/2009 and 12/01/2009

The state tax credit does not have a limit on your income, but it does require you to be purchasing a newly built home, between 03/01/2009 and 03/01/2010. the credit is not a loan as long as the home remains your primary residence for two years.

Home buyers can tap both programs and get a possible 18,000 tax credit, but time is running out to cash in on the opportunity. California set aside 100 million for the program and it is depleting faster than expected. Also the end of the federal program (12/01/2009) is fast approaching. Home buyers who don’t act now could end up out of luck…..

After 18 months of study and consumer testing, the Fed’s division of consumer affairs proposed, and governors accepted, a change to how finance charges and the annual percentage rate would be calculated. They also proposed restricting some bonus compensation from lenders to those who originate loans.

The action by the Fed’s Board of Governors, which requires a four-month comment period before becoming final, came as Congress is weighing an Obama administration proposal to strip the central bank of some of its regulatory authority over consumer credit products such as mortgages and credit cards. The administration favors giving those powers to a new Consumer Financial Protection Agency, which would have the sole mandate of protecting consumers from abusive practices such as the weakened lending standards that triggered a collapse of the housing sector. This crisis in mortgage lending quickly morphed into a global financial crisis.

Last month’s Fed vote also came hours after the National Association of Realtors reported that sales of existing homes rose 3.6% in June, the third consecutive month of increasing sales. All regions of the country posted growth, and the percentage of distress sales fell to 31% from 33% in May.

This report provides further evidence that activity in the housing market is stabilizing and that price declines are slowing. The increase in home sales over the last three months was the fastest since May 2004 (in percentage terms) and the NAR reports that the share of distressed sales is declining. This report, along with recent data on housing starts, building permits suggests that we may have seen the bottom in home sales and housing construction.

Wall Street cheered the housing news.

The Dow Jones Industrial Average closed up 188.03 points to 9069.29, crossing the psychological threshold of 9,000. The S&P 500 finished up 22.22 points to 976.29, and the Nasdaq wrapped up the day with a gain of 47.22 points to 1973.60.

Under the Fed proposal, lenders or other originators of mortgages-such as mortgage brokers-would have to provide borrowers with clear one-page explanations of how adjustable-rate mortgages, like those that triggered the housing crisis, differ from fixed-rate products. They’d have to provide clearer examples of what borrowers’ true costs would be, using the loans themselves rather than generic examples.

Lenders also would have to notify borrowers of payment changes 60 days beforehand, rather than the current 25 days. Similarly, for home-equity lines of credit, the notification period would be 45 days instead of 15.

Those moves are decidedly more consumer-friendly, giving borrowers more notice to adjust to pending changes and perhaps seek refinancing in the case of adjustable-rate loans.

The most controversial proposed change is restricting special compensation from lenders when mortgage brokers get borrowers into higher-priced loans when they qualified for lower rates. This bonus, called a yield-spread premium, was a factor in the explosion of sub-prime lending, which involved high-cost loans given to the weakest borrowers.

The National Association of Mortgage Brokers has defended these special commissions but it declined immediate comment on the proposed rule change, which expressly would prohibit steering consumers to higher-priced products in pursuit of personal gain.

During the comment period, the Fed will work to create similar disclosures at the Department of Housing and Urban Development, which has jurisdiction over the settlement documents involved in home purchases.

“It is a complex and comprehensive proposal, so I think an extended comment period is appropriate,” Fed Chairman Ben Bernanke said.

More information on this will be available approx. November 2009

The Commerce Department reported that the economy shrank at an annualized rate of 1% in the year’s second quarter, less than most analysts had expected, and far less than the dramatic 6.4% shrinkage in the first quarter, a figure revised downward from the initial estimate of 5.5%.

Independent economists think the economy now is poised to grow, albeit slowly.

The key point is that this is the last negative (growth) report in the Great Recession, signaling the end of the downturn. The economy won’t come charging back, but at it’s back.

Recent reports on improving home and auto sales also argue well for the near future. Leading indicators of activity are pointing up, and the housing sector appears to be stabilizing. As more stimulus dollars hit the street, we should see improvement in the difficult employment and financial conditions in many hard-hit regions of the country.

President Barack Obama credited the $787 billion economic stimulus plan that passed earlier this year for the emerging signs of recovery. “This and other difficult but important steps that we’ve taken over the last six months have helped us put the brakes on recession,” he said at the White House. “I am guardedly optimistic about the direction that our economy is going, but we’ve got a lot more work to do.”

There’s plenty that still can go wrong, I worry that we don’t have the foundations for a durable recovery, that we still have banks with large unrecognized losses. Layoffs were expected to continue throughout the year, with the jobless rate rising above 10%. That’ll test bank balance sheets. That’ll test business models generally. A lot of manufacturing and retail activity doesn’t look good when the unemployment rate is above 10 percent. 2010 remains a question, and nothing in these numbers tells you anything about 2010.”

In another worrisome sign, real personal-consumption expenditures fell 1.2% in the second quarter, after increasing 0.6% from January through March. Consumer spending powers two-thirds of U.S. economic activity. Sales of durable goods-big-ticket items such as large appliances and wide-screen televisions-shrunk 7.1% from April to June after expanding at a 3.9% annual rate in the three previous months. Consumer spending is unlikely to return to pre-recession levels until the nation stops shedding jobs. That’s bad news for retailers and restaurants. I think consumers are going to need a little more proof. These are certainly welcome signs, but I think it is going to take a little more time before we see consumers shift from necessity to discretionary purchases.

The National Restaurant Association was equally cautious. Its latest outlook, said that June marked the 13th consecutive month of sales declines for restaurant owners. Restaurant operators continued to report declines in same-store sales and customer traffic in June, and their outlook for sales growth in the months ahead remains mixed.

All in all it is starting to look the like the end of the recession in is sight.

The governments Cash for Clunkers program (C.A.R.S.) began stimulating the economy a month before the first rebate check was cut to a consumer for a new vehicle. “Manufacturers and dealers have spent millions to reach consumers who qualify for the $4,500 government funded rebates,” said Sharon O’Connell from www.CashForClunkersInformation.org.

Big budgets have been activated to implement campaigns targeting clunker consumers who are eligible for the program and the early results suggest the returns will be worth the investment. “We predict that the annualized selling rate for July will exceed 10 million vehicles for the first time this year due to the government program bringing dormant consumers back into the market,” adds O’Connell. “We think August could do even better with a million or more sales due to increased demand from the CARS program.”

“The stimulus helps local markets more than national car companies because car dealers stimulate the local economy through their big advertising expenditures, job creation and enormous state tax revenue,” said O’Connell. “A small dealership who sells 100 vehicles a month spends an average of $500 per car in advertising, which is a total of $50,000 that is spent in local advertising.”

Courtesy Chevrolet, one of GM’s largest dealerships in the country, “bought new inventory, hired additional salespeople and increased our ad budget by 88%,” said Scott Gruwell. “We spent $200,000 on a targeted direct mail and Web campaign to every customer in our market and we launched a regional information portal called www.CashForClunkersDC.com,” said Vince Sheehy, owner of www.Sheehy.com in Washington, DC, Virginia, Maryland and Baltimore. “So far we have sold over 100 vehicles while most dealers in our area are just getting started.”

Early Spenders are the Early Winners
Most of the economic activity generated up to this point has come from early spenders who also appear to be early winners in the race to reach clunker consumers. The winning retailers have been marketing to consumers for weeks while others are just getting started. Hyundai and a small group of dealer groups got a head start when they announced they would help consumers participate in the program starting on July 1st, while others were turning them away until the final rule was published on the 24th. The NHTSA and the National Automobile Dealers Assn. warned dealers against doing transactions before the final rules were announced on July 24th. Despite these warnings, Hyundai and a few dealers took the risk to help consumers get rebates when the law said they could. “Hyundai has attributed 10 percent of July’s sales to the program and some dealers have generated hundreds of incremental sales,” said O’Connell.

More than 70% of the clunkers were Ford or Chevy trade ins, 71% of the clunkers were SUVs, 93% had over 100k miles and 71% qualified for the $4,500 because SUV’s only need a 5 mpg improvement to get the full $4,500 rebate. The average clunker trade in gets 17 mpg and the average new vehicle gets 25 mpg, which is an average of an 8 mpg improvement.

Some dealers had over 100 orders by the time the final rule was announced and our customers appreciated the fact that we could help them when they were turned away by other dealers that weren’t ready,” said Sheehy. It turns out their strategy was not very risky because the Consumer Assistance to Recycle and Save Act clearly states that consumers were eligible for rebates starting July 1st.