Questionable claims for $8,000 first-time home-buyer tax credit spawn IRS investigations

The $8,000 federal tax credit for first-time home buyers might have been created as a way to jump-start the housing market, but it's also apparently stirred up some fraudulent activity, according to an article in today's Wall Street Journal. The Internal Revenue Service is reportedly investigating more than 100,000 suspicious claims out of the approximately 1 million tax-credit claims people have filed.

Loose oversight of the filing process is apparently to blame. The credit "has some fraud issues because it's not being done at the time of the sale," Bonnie Speedy, national director of AARP Tax-Aide, told a White House tax-advisory panel. "People are filing for the home credit who don't have a right to file for it."

The IRS's findings could dampen efforts to extend the tax credit past its current November 30 end date, to increase it to $15,000, and even to offer it to all home buyers.—Daniel DiClerico | e-mail | Twitter | Forums | Facebook

Essential information: Learn how to buy a foreclosed home and be sure to get a thorough inspection of any property you're considering. Once you've moved in, refer to our Kitchen-Planning Guide and Home Improvement Guide interactive.

Latest Consumer Reports Index shows U.S. consumers in a down mood

A year after the collapse of Lehman Brothers and the global financial crisis the firm's demise triggered, the economic outlook doesn't look any brighter, according to the latest Consumer Reports Sentiment Index, one of several indices that comprise the overall Consumer Reports Index. The Sentiment Index slipped to 38.1, its lowest level since October 2008.

U.S. consumers aren't in much of a spending mood, but they did do some shopping last month, according to the Consumer Reports Retail Index. Purchases of small appliances and personal electronics, for example, both rose slightly in August, and that uptick is expected to continue through September.

Of course, Americans would have to buy many toasters and TV sets to boost the overall economy. Home sales might prove to the source of some positive news. The number of consumers planning to buy a home in September has climbed to 2.6 percent compared with 1.2 percent in August.—Daniel DiClerico | e-mail | Twitter | Forums | Facebook

Essential information: Check out our Kitchen-Planning Guide for details on and ratings of appliances large and small as well as remodeling tips. And read our home-buying advice, including directions on navigating the foreclosure market.

Updated FEMA flood maps inundate many homeowners with unexpected insurance costs

My sister lives in Vermont, not a state historically known for flooding. In fact, since 1978, few states have received less money from the federal government for flood-related damage, according to statistics from the National Flood Insurance Program (NFIP).

But while buying a home recently, she was surprised to learn that properties that had been considered outside of a 100-year floodplain—and, as such, didn't require their owners to buy flood insurance, as mandated by the NFIP—now are deemed vulnerable to flooding. The reason for the change? The Federal Emergency Management Agency has issued new flood-hazard maps for the Green Mountain state.

Many homeowners in New York, New Jersey, and Connecticut are facing a similar change in the flood status of their properties, according to a recent report in The New York Times on FEMA's five-year, $1 billion effort to draw new flood-hazard maps and identify properties vulnerable to a 100-year flood. That century benchmark indicates there's a 1 percent chance of a flood occurring every year, not that a flood will occur once every 100 years and is the standard used to determine whether a house or other structure must be covered by flood insurance.

As reported in the Times' article, 4,300 properties in New Jersey that had been outside of a 100-year floodplain have been deemed flood prone, requiring owners to buy hundreds of dollars a year in flood insurance. Some homeowners are benefiting from the new maps, since homes that had been in a 100-year floodplain are no longer according to the new maps.

Some critics suggest that the federal government called for the remapping to refill FEMA's payout coffers after 2005's Hurricane Katrina. But FEMA officials insist the initiative was the result of a 1994 order from Congress to update its decades-old flood maps to reflect increased flood risk caused by development and natural changes to terrain.

To find out whether your home or one you're considering buying is affected by the new flood-hazard maps, visit FEMA's Map Service Center. Also read our report on flood insurance and watch the video (above) to be sure you buy the right type and amount of coverage.—Daniel DiClerico | e-mail | Twitter | Forums | Facebook

Essential information: Use our Storm & Emergency Guide for advice on planning for and coping with weather emergencies.

Real energy—and financial—savings start at home

Given the American infatuation with the automobile, you might think that cars and trucks use the most energy in this country. But it turns out that driving is not the biggest energy hog.

The American home consumes the most energy, according to the Energy Information Administration, which says that of the nearly 100 quadrillion Btu the U.S. burned through in 2008, roughly 22 percent of that was consumed by residential buildings, compared with 17 percent by automobiles. While the American car industry has been taken to task for not having prioritized fuel efficiency, U.S. home builders have been just as negligent.

"It's embarrassing," says Chandler von Schrader, head of the U.S. Environmental Protection Agency's Improve Your Home's Energy Efficiency with Energy Star. "We have this enormous housing stock and it's in generally poor condition because most of the homes were built before energy was a real concern."

The good news is that most homes—including yours—can be made more efficient, lowering your utility bills and national energy consumption alike. In fact, residential energy use would decline 22.5 percent if the roughly 120 million homes built before 2000 were made as efficient as those built since then, according to "The State of the Nation's Housing 2009," from Harvard University's Joint Center for Housing Studies. For individual homeowners, that translates into annual savings of up to $1,500. Use our four strategies to cut your household-energy use.

While nothing on the order of the $3 billion cash-for-clunkers program for cars exists for homes, Uncle Sam has created financial incentives aimed at residential energy efficiency. For example, we've been reporting on the $300 million State Energy Efficient Appliance Rebate Program. Our newly launched Energy Saving & Green Living guide contains other helpful information, including tips for buttoning up the exterior of your home, an update of the latest energy tax credits, and advice for choosing energy-efficient refrigerators, washing machines, and other appliances.—Daniel DiClerico | e-mail | Twitter | Forums | Facebook

DIY or die? Building bust forces toolmaker to target homeowners

There's been some good news of late for the  housing industry, including a 7.2 percent  increase in existing-home sales for July, the fourth consecutive month of positive sales. But manufacturers that support the construction industry are still feeling pinched.

Bobcat Company, which makes light-construction equipment, announced this week that it will be closing its Bismarck, North Dakota plant; 475 jobs hang in the balance as the company juggles positions at a neighboring plant. "We are facing a huge economic challenge and we need to adapt,"  said Rich Goldsbury, president of Bobcat Americas.

To avoid downsizing, other companies are highlighting existing models or developing new ones that appeal to a wider market. That can be a boon for you. In our ongoing tests of cordless drills, we're seeing some major brands emphasize products for the homeowner market. Porter-Cable, for example, has been known for heavy-duty—and often hefty-priced—power tools. But its new 18-volt PC180DK-2 drill costs just $100. Better yet, it's holding its own in our drilling-speed and torque tests.

While Porter-Cable is not abandoning the contractor market, Frank Andrew, director of marketing, wrote in an e-mail that "the Porter-Cable line is designed to serve [a] crossover segment: pro users or DIYers who want performance for tough jobs, but cannot justify the expense of industrial-grade tools."

Whatever you call it, a power tool that delivers pro performance at consumer-friendly prices is a good thing in our book. Watch the video above to learn about drills that provide heavy-duty performance at  lower prices (ratings available to subscribers).—Daniel DiClerico | e-mail | Twitter | Forums | Facebook

Essential information: Look for our latest report on cordless drills in the November 2009 issue of Consumer Reports, online and on newsstands in October.

Don't fall for mortgage scams

With foreclosures in this country reaching a record high, as we recently reported, it's not surprising that more strapped homeowners are looking for some help to avoid losing their homes.

It's also no surprise that scammers are preying on vulnerable homeowners, as evidenced by this week's arrest in Westchester County, New York, of eight people who allegedly defrauded homeowners and mortgage lenders of $1.4 million.

If you're at risk of losing your home, read this story from the September 2009 of the Consumer Reports Money Adviser to avoid foreclosure and learn how to avoid getting ripped off if you're trying to refinance or modify your mortgage.

Essential information: If you or a family member are considering a reverse mortgage, read "Reversals of Fortune" to learn the ins and outs of these loans.

Tiny Greenwich Village home makes the most of minimal space

This 9.5-foot-wide home for sale on Bedford Street in New York City's Greenwich Village could be a most appropriate buy for this era of downsizing.

The three-story, 42-foot-long town house was built in 1873 and counts actors Cary Grant and John Barrymore, anthropologist Margaret Mead, and Pulitzer Prize-winning poet Edna St. Vincent Millay among its former owners. If not averse to the space, a buyer might pause at the asking price of $2.75 million. The home actually has 1,500 square feet of living space, in line with a trend toward "rightsizing" homes that saw average floor area of newly built home shrink from 2,629 to 2,438 square feet in the last quarter of 2008.

Inside the home, open floor plans and extended balconies give the illusion of roominess, reflecting a move toward better use of existing interior space, as described in our  10 Questions for interviews with The Not So Big House author Sarah Susanka and architect Marianne Cusato.—Gian Trotta | e-mail | Twitter | Forums | Facebook

Essential information: Our newly updated Kitchen-Planning Guide has dozens of tips to maximize your space and budget.

Buzzword: Reburbia

What it means. Reburbia is the name of the design competition in which sponsors Dwell magazine and Inhabitat.com asked "future-forward architects, urban designers, renegade planners, and imaginative engineers" to reimagine cookie-cutter suburban communities like those we covered in our Buzzword on boomburg/boomburg.

Here's how the folks in charge described the goals of the competition:

"In a future where limited natural resources will force us to find better solutions for density and efficiency, what will become of the cul-de-sacs, cookie-cutter tract houses and generic strip malls that have long upheld the diffuse infrastructure of suburbia? How can we redirect these existing spaces to promote sustainability, walkability, and community? It's a problem that demands a visionary design solution and we want you to create the vision!"

Why the buzz? The Reburbia competition kicked off on July 8, with participants submitting entries through the end of last month. After judging, 20 finalists were selected, and the public had until August 17 to vote online for their favorite entry.

Among the concepts were the Miller|Hull Partnership's plan to turn a strip mall into a soilless farm, Forrest Fulton's concept of converting big-box stores into greenhouses and restaurants, and Alexandros Tsolakis and Irene Shamma's idea for "airbia," a way to link suburbs and city centers.

The grand-prize winner was announced today. Calvin Chiu will receive $1,000 for his vision of converting a McMansion into a biofilter water-treatment plant (shown).

"I love [Chiu's] trans-species approach, the acceptance of certain economically obvious shifts that are occurring already in many a recently constructed suburb, and the hydrological inventiveness. It's poetic, not practical ­, and that's exactly why this project is positive evidence of how we might really rethink suburbia," said Geoff Manaugh, a Reburbia judge and the author of BLDGBLOG.

Chiu's concept will be featured in the December issue of Dwell.—Daniel DiClerico | e-mail | Twitter | Forums | Facebook

Essential information: Learn more about the leading edge in planning and home design by reading "Buzzword: Rightsizing" and our 10 Questions for . . . interviews with architect Marianne Cusato and architect Sarah Susanka.

By the Numbers: S&P/Case-Shiller U.S. National Home Price Index sees modest rise. Is housing rebound on the horizon?

139.84

Current level of the Standard & Poor’s/Case-Shiller U.S. National Home Price Index, which tracks residential prices in 20 markets nationwide. The increase from April to May was 0.63 points. (The index is calculated monthly and published with a two-month lag, so May figures are the latest available.) While modest, the gain represents the first positive uptick in the index in three years. “It is very possible that years from now we will say that April 2009 was the trough in home prices,” Maureen Maitland, S&P’s president for index services, told The New York Times.

Earlier this week, the U.S. Census Bureau and the U.S. Department of Housing and Urban Development reported an 11 percent month-over-month increase in sales of new single-family homes for June 2009. That’s the third monthly increase in a row for home sales, which other industry experts have said would point to the beginning of a housing recovery.—Daniel DiClerico | e-mail | Twitter | Forums | Facebook

By the Numbers: Sales of single-family homes climbed in June

11 percent

Month-over-month increase in sales of new single-family homes in June 2009, according to new figures from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development. It’s the third monthly increase in a row for new-home sales. June new-home sales hit a seasonally adjusted annual rate of 384,000.

The latest new-home sales rate is 21.3 percent below the June 2008 rate of 488,000 and represents an 8.8-month supply of homes, according to the federal government. The median sale price in June 2009 was $206,200, a sharp drop from $232,100 in June 2008 and $247,900 in June 2007. In the coming days we’ll report on the Standard & Poor's/Case-Shiller Home Price Index, which tracks residential prices in 20 metropolitan markets nationwide. e-mail | Twitter | Forums | Facebook