Extending The Homebuyer Tax Credit

However, according to the Washington Business Journal, Speaker of the House Nancy Pelosi is hinting that the $8,000 credit may not only be extended, but increased. That would certainly be good news for those buyers who haven’t yet found their first home, or for those who put in bids on short sale homes but haven’t yet received a decision from slow moving banks. >> See First time home-buyer tax credit extended for troops overseas.

The National Association of Realtors suggests that the tax credit helped to create 1.2 million new buyers this year alone, and that at least 350,000 of them would not have considered purchasing a home had they not had the tax credit as an added incentive. The NAR also feels that continuation of the tax credit would convince more than 850,000 buyers to purchase homes, further helping to bring the real estate market to a true bottom.

In addition, the NAR says the credit would stimulate builders to create at least 80,000 new homes. And the National Association of Home Builders, which saw a 3% drop in sales back in August, is lobbying hard in favor of extending the credit. However, as the deadline nears, homebuilders are slowing their rate of construction, for fears of once again being stuck with excess inventory.

Senator Johnny Isakson of Georgia (Republican), is pushing a bill that would increase the credit from $8,000 to $15,000. His bill would also allow all homebuyers, not just those purchasing for the first time, to take advantage of the tax credit. In addition, Isakson wants to eliminate the current income caps attached to the credit. Currently the credit does not apply to individuals who make over $75,000 or to couples who earn more than $150,000.

Critics contend that of the 1.9 million people who took advantage of the tax credit, more than 85% would have purchased a home even had it not been in effect. They feel that falling home prices, combined with mortgage rates hovering around 5% have created a stimulus of their own.

Nonetheless, it is evident that the lure of $8,000 in free money from the tax credit was a stimulus to many buyers who might have waited to purchase. To those who may protest that the tax credit is not really free: this is the reality. You have to remain in the house at least 3 years, otherwise you must repay the tax credit. So, for most people, it’s free money.

This tax credit money, when it returns to families in April, will serve as a further stimulus for the economy. Most new homeowners, once settled into the nest, want to add new furniture, new appliances, and home improvements. The $8,000 tax credit simply injects additional dollars into an economy in need of a jump start. Most important, though, the tax credit helps to create a stable housing market. That stability improves a community, protects a home owner’s investment, and helps to spur economic activity throughout the area.

Written by Marc Jablon, Realty Associates
marcjablon@yahoo.com / 561 / 213 – 6139
www.JablonRealEstate.com