Now Is the Time

Tax incentives for first-time homebuyers help the real estate market rebound



New Orleans homebuyers are returning to the market, thanks largely to national and local tax incentives, and the Louisiana Home Builders Association (LHBA) believes the housing market depression is in recovery.

  "We do think [the tax credit] is helping," LHBA President Phil Hoffman says. "Home building always leads us out of the recession. Right now we have some good trending, good interest rates, and we do see more people in the market, but we do still have many challenges. Unemployment is high, but Louisiana is holding its own. Louisiana is a more stable economy; that's helping builders and realtors see more sales."

  It's no surprise the housing market has been down, because that segment of the economy is usually the first to suffer in a prolonged national recession. It also is among the first to recover, especially when buyers are given economic incentives.

  David Crowe, chief economist with the National Association of Home Builders, says the current rebound in housing sales could be due to the $8,000 first-time homebuyer federal tax credit. President Barack Obama signed the American Recovery and Reinvestment Act of 2009, which allows Americans who have not owned the home they have lived in for the past three years to claim an exemption of up to $8,000 on their 2009 tax returns when they buy a new residence before Dec. 1. Single-income households with earnings of at least $75,000 and married couples who jointly earn $150,000 are eligible for the full tax credit.

  Though the tax credit is offered nationally, it has given the New Orleans realty market a particular boost.

  "We're very busy now thanks to the homebuyers' tax credit," says L. Bryan Francher of Prudential Gardner Realtors. "We have an affordable market range of about $250 a month."

  Francher also notes he has been busy with more closings this quarter. He says it may be due to a new loan program that enables first-time homebuyers who qualify for the $8,000 federal tax credit but don't have a down payment or closing fees to cover those up-front costs.

  Effective May 29, the Federal Housing Administration (FHA) allows state housing-finance agencies to provide second mortgages, turning the tax credits into money that borrowers can use toward their down payments and closing costs to purchase homes with FHA-insured mortgage loans. Because of these two incentives, "interest rates are low, prices are good and banks have been good at putting the word out," Francher says.

  Local incentives also are playing a part in helping New Orleans homebuyers who otherwise would not be able to finance homes. "I've seen a dramatic increase in recent sales," says Stephen Ehlinger, a real estate agent at Latter & Blum Inc. "I've had four closings this month, and it's because of a tremendous credit from the Finance Authority of New Orleans First-Time Homebuyers Fund."

  The Finance Authority of New Orleans and the Louisiana Recovery Authority's (LRA) Pathway to Homeownership Soft-Second Mortgage Loan Program aims to help first-time homebuyers find mostly one- or two-unit residences in Housing Opportunity Zones (zone details can be found at by offering a soft-second mortgage for up to $65,000 with no interest. Loan payments are deferred until after homeowners refinance or sell their residences. This program also offers up to $10,000 for closing-cost assistance if buyers are purchasing a house that will be their principal residence.

  "Because of this program, for me sales have picked up for sure," Ehlinger says.

  Francher and Ehlinger agree New Orleans home prices haven't decreased as much as in other states because housing options here were never as high as in some areas of the country. But the incentives haven't boosted sales for everyone in the local real estate industry.

  "I don't think it's been advertised enough, but it is a good incentive," says Howard Schmalz of Howard Schmalz and Associates Real Estate. "I haven't even dealt with [the Finance Authority of New Orleans First-Time Homebuyers Fund]. A year ago, you could buy a house with no money down, not declaring your income. You could buy a home easier than a TV set, but somehow we've bankrupted the country and now we want to make it easier (to buy a home)? I don't understand that mindset."

  The Finance Authority will offer a $52 million soft-second mortgage program for newly renovated and newly constructed Louisiana Land Trust Properties through a joint venture with the LRA, the Office of Community Development and New Orleans Redevelopment Authority after the initial Pathway to Homeownership Loan Program runs out. The Finance Authority is still working out details of this program.

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