Tax breaks without political campaigns
The tax-savings advantages of homebuying are far and away the biggest and best tax break for middle America. Collectively, homeowners save nearly $100 billion annually on mortgage interest and property deductions alone. This is a great incentive to buy.
In most instances, all of the interest and property taxes you pay in a given year can be fully deducted from your gross income to reduce your taxable income. These deductions can result in thousands of dollars of tax savings, especially in the early years of the mortgage when interest makes up most of the payment. To look at this another way, if you are in the 30 percent tax bracket, you only pay 70 cents on the dollar in mortgage interest payments.
Additionally, the best tax break available to homeowners is when they sell their primary residence. A couple who own and live in their home for two years and then decide to sell can keep up to $500,000 of the profit tax-free. (A single owner can keep $250,000). This is one of the biggest tax advantages of homeownership and one of the greatest ways to build personal wealth.
Incentives for a limited time
The price discount and incentive packages you see are real, but they won’t be around for long. Homebuilders know this and that’s why they don’t mind offering them. They understand that a “Buyers’ market” will last only as long as an oversupply of inventory allows it. When the oversupply recedes, it turns right back around into a “Sellers’ market,” with sellers firmly in control. It is for this reason that they are willing to take hits in the near-term – to more quickly reach that (longer-term) shift in leverage that is approaching with every new home sold around the nation. And make no mistake, with interest rates low and the economy chugging forward, it is fast approaching! Homes are still selling; it’s simply a matter of supply reduction.
Buyer's market means better service, quality
One of the most overlooked aspects of incentives is the intangibles –the higher levels of customer service and personal attention that homebuyers receive in a “Buyers’ market.” Just like in any industry, when demand exceeds supply as it has for the past two years, there generally follows a shortage of labor – everyone from the sub-contractors who build your home, to seasoned site agents with whom everyone wants to work, to front-office personnel. In such an environment, it is a fact that service-issues can arise: A “hurried” sales process; homes not being completed on time; and potential oversight of important quality-control and follow-up issues.
In a “Buyers’ market,” the opposite occurs. Slowing sales and an oversupply of inventory result in a glut of labor. Homes are completed faster and with fewer complications and attention to service increases as agents work harder to close deals.
To this end, in a “Buyers’ market”, what many may notice is that builders and developers pare down their staffs to deal with the slower pace of sales. Newer, less experienced agents can be left to exit the business or push on to other places, leaving the proven “All-Stars” behind (though some All-Stars can also be young!). These “superagents” are the crème-de-la-crème, true professionals who understand the difference between fast food-style “order-taking” and relationship selling.
They understand product better; they are better able to communicate the pros and cons of various floorplan options and upgrades; they can suggest and walk you through financing options themselves; and in some cases, they negotiate on the builder’s behalf to help close deals. In short, in the current marketplace you have a rare window of opportunity to enjoy exceptional choice, incredible discounts and a heightened degree of flexibility, sensitivity and attention to your individual needs. Don’t sit on the sidelines during a remarkable climate for homebuying!