Will Congress Extend First Time Home Buyer Tax Credit?

Question

The $8k first-time-home-buyer-tax-credit deadline is fast approaching (Nov 30th).... will Congress extend the credit as to not endanger the fragile beginnings of a housing recovery? Can the federal budget handle billions more in lost revenue when it's already in record red-ink territory especially as it weighs potentially very expensive issues like health care reform?

http://blogs.wsj.com/developments/2009/08/24/will-congress-extend-the-first-time-home-buyer-tax-credit/

Jeffrey Gordon · Answer

I have a close friend who works in the FHLB system as a recourse UW we were talking today about how many loans she sees with Chase/WA mu that are over 400 days delinquent but not foreclosed on.  California Foreclosure report this month reports the same idea--should be way more foreclosures and REO properties, but FDIC, which is broke, is letting lenders and banks slide on marking to market as that would immediately wipe out all the lender/bank equity.  Kinda of like Japan in the lost decade US is providing liquidity to the idiots who leveraged 30 to 1 and lost the bet.  This is going to be dragged out and covered up with printing press, paper and ink.

Putting a floor under the residential housing market should be the very top priority of politicians, everything else hinges on equity in our homes, we can lose the commercial market to some extent, but firming up the residential market  should be job one.

will they extend, my guess is yes, but I would not bet on it.  if they dont, look for the slow down in the entry level in the next quarter.

if i was king for a day, i would do two things.

1.  Any foreigner who buys a $500,000 and above home gets immediate green card status  when they close, subject to background check

2. New tax credit for 2010 is $15,000 for anyone and available at closing.

this would feed the "move up market" and stablize those prices. It would also bring a lot of wealthy new citizen to this country who can buy there own health insurance and create wealth and jobs.

It will be a lot less expensive to bail out FDIC, Fannie, Freddie, VA, FHA by using tax credits to support the housing market than taking over lenders and MBS etc.

Angie Reed · Answer

Just saw this today http://speakingofrealestate.blogs.realtor.org/2009/09/25/getting-the-tax-credit-extended-outlook/#respond  is health care reform going to steel the show on this one?

Jim Wineinger · Answer

I do agree with this sentiment, but not for the reasons given.
The credit is only for 10% of purchase price and was passed based upon giving the "small" homeowners a chance to get back into the market. Raising the amount will be seen as giving those who can afford the houses a chance to compete with these small homeowners and thereby again squeeze them out of the market.

A move from 8k to 15k would open things up for houses priced above 80K all the way up to 150K when house values are decreasing. Some will argue that this gives the "rich" an advantage because their homes which were valued at 300K-500K and took a real big hit so that they are now only 150K will benefit from the plan which was only meant for the small homeowners.

While I do not agree with these sentiments, it is what I foresee that will prevent its passing.  Extension of current plan should go through fine, but to increase the limit drastically will not happen imo.

Ted Harris · Answer

Senator Reid sees an extension of the current credit ....

Daily Real Estate News  |  August 24, 2009  |    Share
First-Time Buyer Tax Credit Extension Possible 
Bills to extend the maximum $8,000 tax credit for first-time home buyers, which expires Nov. 30, are pending in both the U.S. House and the Senate.

Sen. Christopher J. Dodd, a Connecticut Democrat and chairman of the Senate Banking, Housing, and Urban Affairs Committee, is co-sponsor of a bill with Georgia Republican Sen. Johnny Isakson that would raise the credit amount to a maximum of $15,000.

Senate Majority Leader Harry M. Reid of Nevada favors an extension of the current credit. He was quoted by the Las Vegas Sun saying, "It's something we can get done."

Odds are that the credit will be extended and broadened to cover all buyers next year, but the chances of the amount increasing arenâ€™t as good, observers say.

Source: Washington Post Writers Group, Kenneth R. Harney (08/22/2009)

Peter Giardini · Answer

Here is what I have found.  Take this all with a grain of salt... because I don't think anything will happen if at all until late October or so.

6/10/2009--Introduced.
Home Ownership Moves the Economy (HOME) Act of 2009 - Amends the Internal Revenue Code to: (1) extend the first-time homebuyer tax credit to all individuals who purchase a principal residence (currently, only first-time homebuyers as so defined); (2) extend such credit and the waiver of recapture requirements for such credit through 2010; and (3) repeal the limitation on such credit based on modified adjusted gross income.

Hope this is helpful?

Pete

Jim Wineinger · Answer

Do not have any actual figures on how the credit actually is helping, but there are opinions showing us now in the news that the recent upturn in new homes construction is due to a rush to beat the deadline, so extending the deadline may slow that "rush" of new homes. Or it may bring more into the market.

But a larger factor in this may be the most recent news that the FDIC may actually be in the RED for the first time since the mid 30's and may require additional funding from Congress.

Ted Harris · Answer

That would be a serious boon .... nice to think about a $15k credit to all but virtually no chance of that happening.  I think there's a decent chance the current credit is extended though.

Jon Klaus · Answer

"Not only are some legislators (and real-estate industry lobbyists) already pushing hard for an extension of the tax credit, which will expire Nov. 30, but theyâ€™re also arguing that it should be increased, to $15,000, and expanded to all buyers, and not just those who are first-timers."

Now this would have some impact.  Anyone know how much the existing incentive has done?  How many sales that would not have occurred otherwise?

Will Congress Extend First Time Home Buyer Tax Credit?

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