Question: Existing homeowner credit: Must the new house cost more than the old house?

Answer: No. Thus, for example, individuals who move from a high cost area to a lower cost area who meet all eligibility requirements will qualify for the $6500 credit.


Question: I am an existing homeowner. On October 25, 2009, I signed a contract to purchase a new home. I have lived in my current home for more than 5 consecutive years and am within the new income limits. I will go to settlement on November 20. If President Obama has signed the bill by the time I go to settlement, will I qualify for the new $6500 tax credit?

Answer: Yes. The existing homeowner credit goes into effect for purchases after the date of enactment (when the bill is signed). There is no reference to the date of contract for the new credit. The provision looks solely to the date of purchase, which is generally the date of settlement.


Question: I am a firsttime homebuyer but was not within the prior income limits at the time I entered into my contract to purchase on October 30, 2009. I will be covered, however, by the new income limits. If the new rules have been signed into law by the time I go to settlement, will I be eligible for a credit?

Answer: Yes. The new income limitations go into effect as soon as the President has signed the bill. The income limit and other eligibility rules will look to your status as of the date of purchase, which is the settlement date. So if the new rules have been signed when you go to settlement, you should be eligible for the credit (or a portion of the credit if you're within the phaseout range).


Question: I am an eligible existing homeowner. I have a fair amount of equity in my home. I have found a home with a nonnegotiable price of $825,000. Will I be able to use any of the $6500 tax credit?

Answer: No. The $800,000 cap on the cost of the purchased home is firm at $800,000. Any amount above $800,000 makes the home ineligible for any portion of the credit. The $800,000 is an absolute ceiling.


Question: I owned my home for 10 years, but sold it two years ago year and have been renting since. If I purchase a home, will I be eligible for the $6500 tax credit if I meet all the other eligibility tests?

Answer: Yes. Because you lived in the home for more than 5 consecutive years of the previous 8, you will qualify for the $6500 credit. For example, Say John and his wife bought a home in 2000 and lived there until 2008 when he got a divorce. Whether John has been renting or bought in the interim, he WOULD INDEED be eligible for the credit because he owned a home and occupied it as his principal residence for 5 consecutive years out of the last 8 years. The keyword here is "consecutive." As long as he lived in that house for 5 years straight what he did since 3 years doesn't impact eligibility.


Question: I am an eligible firsttime homebuyer. I entered into a contract to purchase on November 1, 2009. Do I have to go to closing before December 1? How does the extension date affect me?

Answer: You do not have to close before December 1. Once the legislation has been signed, it will be as if the Nov 30 date had never existed. Therefore, so long as the contract settles before April 30 (or July 1, worst case), the purchaser will be eligible for the credit.

The University of Hawaii Economic Research Organization (UHERO) has just released their latest Hawaii Construction Forecast.

UHERO's Economic Information Service provides complete analysis and detailed industry-level forecasts for up to five years. The EIS is a research program of the University of Hawaii at Manoa and depends on financial support from report subscribers and program sponsors. The complete versions of this and other EIS reports are also available for individual purchase. For more information, visit the EIS information page. 

 Here's the summary information:

The U.S. recession is easing, but prospects for a quick Hawai'i construction recovery remain poor. At the national level, expansion is just now getting underway. We expect U.S. output to grow by more than 2% during the current quarter, but job losses will continue into the first part of 2010. And, while overall credit conditions have improved, commercial lending is still being affected by the weak economic outlook and the hangover from past excesses. For Hawai'i, this means that commercial and resort development will continue to suffer for some time. The downturn in residential permitting has actually deepened, and we will not see any marked improvement until home prices bottom out in 2011.

• Despite some positive signs of a bottom in resales and encouraging levels of inventory, we have raised only marginally our forecast for single family homes. We expect the median price of a single family home on O'ahu to fall by 8.7% this year, followed by a 2.4% drop in 2010, before stabilizing the following year.

• The peak-to-trough decline in home prices between the second quarter of 2007 and the first quarter of 2011 is expected to be 18%. This is considerably less than the average decline that has occurred nationally, and less than that experienced during the 1990s Hawai'i downturn. The primary reason for this optimism is that we have not yet seen inventory and days on market reach the high levels of the '90s.

• Price declines have been considerably deeper on the Neighbor Islands than on O'ahu. This is particularly true for condominiums, which on the Neighbor Islands include a large portion of vacation homes and timeshares. Median condo prices have fallen from their peaks by 39% on the Big Island, 33% on Maui, and 46% on Kaua'i.

• UHERO's Honolulu Housing Affordability Index dropped to a low of 56.4 in 2006 and will peak at near 76 this year\textemdash meaning that a household earning the median income will be able to afford a single family home that cost no more than 76% of the existing median home price. We expect that mortgage rates will rise slowly over the next few years.

• The outlook for new home building is modestly lower than we reported in our March report. For 2009, we now expect a drop in residential permits of 44% this year, followed by a further 4% drop in 2010.

• Because of larger-than-expected job losses in recent months, we have lowered our forecast for construction jobs to -14% for the year. We expect that 2010 will see additional job losses, with quarter-to-quarter growth not resuming until the end of the year.

• Credit conditions remain tight, and prospects for broad based growth in Hawai'i's economy are limited. Because of this, commercial, industrial and resort development will continue to slide this year and next. We continue to predict a 30% drop in real non-residential building permits in 2009 and expect one more year of modest (5%) decline in 2010.

• Because contracting for Federal and State infrastructure programs has taken longer than we originally expected, the surge in government contracts has been pushed back one year. We now expect real government contracts awarded to grow by only 4.5% in 2009, before jumping by 36% to $1.36 billion next year.

• We expect total real construction spending measured by the inflation-adjusted contracting tax base to decline 20% in 2009, and an additional 16% in 2010.

• This report marks the first time in more than a year that we are not lowering our forecast significantly. In fact, our forecast for O'ahu single family home prices is slightly higher than in March, and our outlook for total private building is almost identical to our forecast from six months ago. While there is still considerable downside risk, the stabilization of the forecast picture is encouraging news.

Bank attitudes toward risky lending is making it very difficult for the self-employed, even those with high incomes, to secure mortgages.

No-doc loans are particularly hard to get, locking out people whose incomes are derived from investments or who are able to tax-shelter significant dollars.

The California Mortgage Bankers Association spokesman Dustin Hobbs says the industry understands that banning most alternative financing isn’t the long-term answer.

"It's a reaction to the current environment," he says. "There's such a lack of appetite for risk right now in general that any product viewed as having any sort of risk at all has a tough hill to climb."

Chris George, president of CMG Mortgage, predicts that no-docs and other nontraditional loans will be back within the next six months as lenders gain confidence. "As with injuries, as with your credit, as with the economy, time heals all wounds," he says.

Source: The San Francisco Chronicle, James Temple (07/09/2009)

It rained in Hilo just up to when the fireworks started, then stopped just long enough for the show. Hilo town was so busy on the 4th of July with the Hilo Bay BBQ & Chili Cookoff, Farmer's Market, and a classic car show all happening within walking distance of downtown.

These photos were taken from the roof of the Volcano Building across from the Island Trust Properties office.