Local real estate agents and lenders are optimistic about new incentives becoming available to home buyers and those struggling with payments.
But most of them say consumer confidence and job security will be the real key to driving the economy.
Dwight Kruse, president of Century 21 Affiliated in Beloit, said the incentives already are making a difference.
“Traffic is increasing every day. Agents are in constant conversation with clients about getting back in the market,” Kruse said. “The mood started lifting a couple weeks ago. It certainly has a lot to do with the stimulus package. If we get some nice weather, that will help too.”
Kruse said that cutting down on foreclosures will increase demand in the marketplace. Demand, coupled with incentives offered to new home buyers, will revive the housing market, he believes.
“It's very encouraging. I'm very excited for buyers to get the opportunities,” Kruse said.
Wade Williams, managing broker of Coldwell Banker Premier Borts, explained some of the home ownership incentive programs.
Since President Barack Obama signed the American Recovery and Reinvestment Act of 2009 into law, there is a new tax credit of $8,000 applied to home purchases closed in 2009. The credit is equal to 10 percent of the purchase price of the home, but may not be greater than $8,000.
Because the average home buyer today is somebody buying their first home, Williams said the tax credit is very effective.
“It will help many home sellers and it will help many people involved in the real estate business such as lenders, banks, credit unions, appraisers and insurance companies,” Williams said.
The Homeowner Affordability and Stability Plan is intended to help 7 to 9 million families restructure or refinance their mortgages to avoid foreclosure. The first component of the plan is to offer refinancing to homeowners to make their mortgages more affordable. Williams said interest rates have come down substantially since the fall of 2008 and frequently can be found at 5 percent.
However, Williams said many people have found they don't qualify for refinancing because the value of their property has gone down.
“Hard working people who bought a house three years ago may be in situations today where refinancing can be impossible. Under the plan, which is starting on March 4, there is a provision so people can go to local lenders and refinance even though the value of their property may have dropped,” Williams said.
There is also a $75 billion Homeowner Stability Initiative to reach 3 million to 4 million at-risk homeowners.
“This is for people working as hard as they can and are just getting by making their house payment,” Williams said. “It would be for someone who has lost his or her job, or had hours cut.”
Williams said there is a public misperception that this assistance is for people who haven't made payments. He stressed that this is for those who have found some type of work to keep making their payments, but may not be able to continue paying the same rate because of situations out of their control such as layoffs, job losses or pay cuts.
“It's for people who are right on the edge, but are still making payments. Lenders will be allowed to adjust the mortgage loans so as to reduce the monthly payment to fit the borrower's current monthly income. The reduced payment can stay in effect for up to five years,” Williams said.
The third aspect of the plan is to support low mortgage rates by strengthening confidence in Fannie Mae and Freddie Mac. Williams said this part of the strategy will encourage lenders to offer home buyers incentives.
“The U.S Department of Treasury is going to compensate the lenders for doing these loan modifications,” Williams said. “It's a winning situation for everybody involved.”
Ron Balsam of Alpine Bank of Illinois in Rockford, agreed there are many great incentives to home buyers in the stimulus package as well as the market itself. He said some builders have cut their margins a bit in order to build new homes.
“The cost of the construction and raw materials has come down a little,” Balsam said.
Balsam added that there is a special deal offered to Illinois first-time home buyers called the Mortgage Credit Certificate. With the certificate, first-time home buyers can take 20 percent of the interest they pay over the life of the loan as a tax credit in addition to deducting the remaining 80 percent as they normally do.
“They just came out with this program a few weeks ago. It's available statewide,” Balsam said.
Over the life of a mortgage for a $150,000 home, for example, a home owner would save up to $35,000 in tax credits.
“It's good news and it helps stimulate the bottom of the chain, first time home buyers. People in the middle can buy another house and it will start a chain reaction in the system,” Balsam said.
Dave Adkins, senior vice president of consumer banking at Blackhawk Bank, said the incentives to both home owners and lenders in the Homeowner Affordability and Stability Plan will be helpful in offering more refinancing opportunities. Although Atkins said local banks are already working with clients to help them keep their homes, the incentives will enable the bank to offer refinancing for people whose property values have come down.
“We are working with our clients every day. The last thing in the world we want is to take property back,” Adkins said.
Johanna Koslofski, an owner and broker at Valley Realtors in Roscoe, said the incentives aren't a cure-all, but are a good deal for first time home buyers or anyone who hasn't owned a home in the past three years.
The best way to help the real estate market, however, is consumer confidence. Although interest rates are lower than they've been in years, Koslofski said a lot of clients need more confidence in their jobs and their spouse's job.
Balsam agreed.
“That confidence comes from people knowing whether they have a job or not. People who are unsure if they are going to be working aren't going to go buy a home,” Balsam said.