Should the Home Buyer Tax Credit be Extended - Yes or No
Posted September 03, 2009
 Capitol Hill may be vacant right now as Senators and Congressmen are home listening to their constituents, but real estate and home builder lobbying group[s are actively working on a full-bore campaign to extend the $8,000 first-time home buyer tax credit
currently scheduled to expire on November 30, 2009.
As you may know, the American Recovery and Reinvestment Act of 2009 ( known as the "stimulus package") set up a tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence between January 1, 2009 and November 30, 2009. The program has succeeded
in reducing the inventory of unsold homes in Sarasota while helping many families afford their first home.
The National Association of Home Builders (NAHB) and the National Association of Realtors (NAR) are both hoping to persuade Congress to pass legislation to extend the tax credit as soon as possible after Congress returns to Washington next week.
The two associations have been contacting members of Congress while they've been in their home districts during their congressional recess. In addition to an extension of the first-time home buyer credit, they want to expand the program to cover all homebuyers through the end of 2010.
Recently Senate Majority Leader Harry Reid recently indicated that he believes “it's something we can get done.” Senate Banking Committee Chairman Democrat Chris Dodd and Republican Johnny Isakson are sponsoring a bill that would extend the credit through 2010 and expand it to a $15,000 maximum.
In the House, two different bills have been introduced to extend and expand the credit for either 6 or 12 months. NAR and the NAHB organizations are strongly supporting these initiatives.
With this impetus, it seems likely that in one form or another, the tax credit will be extended into next year, but...
As we've come to understand, however, there is no such thing as a "sure thing" in Washington, DC . NAR spokesperson Walter Molony recently justified NAR's support of the tax credit saying that it is reducing the inventory of unsold homes and stabilizing home prices, benefiting the economy
since in his judgment home prices “overshot to the downside.” But, the NAR also estimates that 1.8 million to 2.0 million first-time buyers will take advantage of the $8,000 first-time home buyer tax credit before the current version expires.
The program, as it now exists, is expected to cost a bit over $15 billion.
Viewed another way, NAR's own estimate is that only 350,000 of the homes sold under the program would not have been sold without the tax credit. If you now divide
the $15.2 billion the program cost by only those 350,000 homes that might not have sold without it and you get a whopping $42,800 per additional home actually sold. And, critics of the program complain that the numbers will only get worse if the program is extended and expanded.
These more pessimistic views of the program will likely lead fiscally conservative Congressional members in both the Democratic and Republican parties to complain that an extension will only add to the already ballooning national debt.
Legislation that looks, at any given moment, as if it will clearly be enacted can be delayed, watered down, or frustrated in the House and filibustered in the Senate.
So, if you are in the market for a home and you qualify for the current $8,000 tax credit, you should be working with a Realtor right now
to buy the home you've been wanting so you can close on it before the November 30th expiration of the current program. If you aren't already involved, contact Judie Berger right now and get started
toward owning your piece of our Sunny Southwest Florida paradise.
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