Iowa City Real Estate Blog: Iowa City Real Estate: Do You Buy Now and Take the $8000 Tax Credit for First Time Buyers Or...Wait?

Iowa City Real Estate: Do You Buy Now and Take the $8000 First Time Home Buyer Tax Credit Or...Wait?

As the deadline for the first time home buyer tax credit approaches I see more and more written about whether first time home buyers should take advantage of it or not. Apparently in some parts of the country buyers are getting into "panic buying" mode to make sure they get their $8000 credit. They're overpaying for homes just so they can take advantage of the tax credit. Sounds crazy, right? All I can say is if you're living in a part of the country where that's the case, then you really want to look at the big picture. Depending on your market, paying more for a home may be okay, but you really need to be sure that your market is improving and that your investment is a sound one. You don't want to turn round in a year and find your home has depreciated in value. The $8000 tax credit will be poor consolation to you if that happens.

That's my 2¢ worth for you if you live in a market other than Iowa City...This post on the other hand is for first time home buyers still on the fence about buying a home in my area - the Iowa City, Coralville and North Liberty area. I want to make sure you know what THIS market is doing and let that be the basis for your decision whether or not to buy now or wait until after November 30 to buy your home.

First of all, it's worth mentioning that here in the Iowa City area home sales and prices have stayed relatively stable during the downturn in the housing market. Sure the Iowa City real estate market is flat and sellers certainly aren't making much, (if anything) when their selling their homes. On the other hand, home prices have certainly NOT declined 20%-30% as they have in other parts of the country. Neither do we have a large amount of foreclosure homes on the market.

Buying Iowa City real estate is still a good investment. That's probably the most important thing you need to know as you contemplate whether or not to buy now and take advantage of the $8000 tax credit.

The next question is, will prices fall in the winter canceling out the value of the $8000 tax credit? I don't have a crystal ball, but I'd say that's doubtful. After checking the Iowa City MLS for the period Oct 1, 2008 through Jan 31, 2009 I can tell you that home prices in Iowa City rose by 1% in comparison to the same period in 2007-2008. And right now they're down 2% for the year. Like I said though, I don't have a crystal ball and refuse to speculate on what will happen when the first time home buyer tax credit disappears. I prefer to work with data. I believe past performance is a good indicator for future results. I also think in general the economy is improving. That's my personal opinion though, not a fact. You might think differently about the economy and that may lead you to draw a different conclusion.

Okay, so that's my take on what's going on in the Iowa City real estate market right now. So should you take advantage of the $8000 first time home buyer tax credit?

Advantages of buying a home now? Low interest rates, low home prices AND $8000 free money. (And if you think about it, the $8000 is worth a whole lot more when you consider how much you actually need to earn to end up with a net of $8000).

What would be the advantage of waiting? Oh I don't know, maybe the idea that the tax credit may be increased to $15,000 after November 30 when the current one expires. Personally I'm a bird in the hand kind of gal myself. Not big on speculating either. You may disagree - In that case you wait. It's not my job to change your mind, It's my job to give you the information you need to make informed decisions.