UPDATE October 26th
The current $8,000 tax credit for first time home buyers is set to expire in approximately a month. Since then, there has been a rush for buyers to find a home and close before the December 1st, 2009 deadline.
In a related CNBC interview, several industry experts discuss whether extending the tax credit is a good idea and some details of some of the bills currently in Congress.
Finding information of the current bills being proposed to Congress isn’t the easiest thing to find. Kudos to Jay Thompson from www.phoenixrealestateguy.com who posted details of the bills last June.
Here are some details of the 6 proposals currently being discussed in Washington as mentioned in his blog. 5 were discussed in a post in June and the 6th on a blog posted last month.
Here is an excerpt from Jay’s June blog post:
Currently there are FIVE bills flitting about Washington, D.C. that would, assuming they are signed into law, either extend or expand the currently existing $8,000 homebuyer tax credit due to end on December 1, 2009.
Senator Johnny Isakson (R-GA) introduced Senate Bill S1230 – the Home Buyer Tax Credit Act of 2009 – on June 10. Senator Isakson created the original $15,000 homebuyer tax credit that morphed into the current $8,000 first-time homebuyer tax credit that became law when the Stimulus Bill was passed. This bill proposes a non-refundable tax credit up to $15,000, that can be split equally over two years, for all primary residence purchases – not just purchases by first time home buyers. The bill has been referred to the Senate Finance Committee for further debate. It has 12 cosponsors, notably including Senator Chris Dodd (D-CT), the Senate Banking Committee Chairman. It would expire one year after enactment.
Representative Kenny Marchant (R-TX) introduced House Bill HR 2619 on May 21. This proposes to extend the existing $8,000 tax credit to July 1, 2010 and adds provisions for a tax credit of up to $3,000 for homeowners who refinance. This bill has been referred to the House Ways & Means Committee for further debate. There are currently no cosponsors.
Representative Eddie Bernice Johnson (D-TX) introduced HR 2606 – the Home Buying Credit Expansion Act – on May 21. This bill proposes to remove the first-time homebuyer requirement (allowing all principle residence purchases to qualify for a tax credit) as well as extends the bill through Jan 1, 2010. It has one cosponsor (Rep Timothy Bishop D-NY) and has been referred to the House Ways & means Committee.
Representative Howard Coble (R-NC) introduced HR 2801 – the Home Ownership Move the Economy (HOME) Act – on June 10. From the Department of Redundancy Department, this bill appears virtually identical to Rep Johnson’s in that it opens the tax credit up to all primary residence purchases and extends the credit to Jan 1, 2011. It has no cosponsors yet and has also been referred to the House Ways & Means Committee.
Representative Dan Burton (R-IN) introduced HR 2655 on June 2. It has picked up six cosponsors, four Republicans and two Democrats. It joins its cousins in the House Ways & Means Committee and also eliminates the first time home buyer requirement while extending the credit to Jan 1, 2011. CLICK HERE TO READ THE ENTIRE POST
Here is an excerpt from Mr. Thompson’s recent post discussing the 6th proposal:
…a sixth bill to extend the tax credit was introduced in the Senate last week. Senate Bill S1678 extends the existing first-time homebuyer tax credit to June 1, 2010. It makes no changes to the requirement that one must be a first time buyer (defined as not owning a home in the last three years) or to income limits that currently exist in the current law. CLICK HERE TO READ THE ENTIRE POST
In the most recent news, Senate Majority Leader Harry Reid is proposing a counter to Senator Johnny Isakson’s Bill S1230. His proposal would extend the credit through December 31, 2010 with a plan to phase the credit down to $6,000 in April through the end of June, $4,000 from July through the end of September and $2,000 from October until the end of the year.
What’s interesting is how much these tax credits differ. Personally, I don’t think making the credit larger will help much. Will a buyer really say, “$8,000 isn’t enough to get me excited. However, $15,000 would do the trick!” Every buyer I’ve talked to is throughly pleased with the amount.
I do think that raising the qualifying income limits, extending it to all home buyers and extending the deadline will. The goal for the tax credit is to incentivize home buyers into making a decision. I’ve found that many of the most undecisive buyers are ones who currently own a home. They know they’re going to lose money when they sell which often hampers their decision. I think an incentive for existing home owners is a great idea. This will help move inventory of sellers who are waiting for the market to turn, which may slow the growth of the real estate market for many years as mentioned by Spencer Rascoff on Bloomberg (Related Blog post here).
UPDATE:
Senate Majority Leader- Harry Reid’s office has reported to CNBC that an agreement has been made to extend the credit through April 30th of 2010.
You can find all the details on this related blog post:
http://www.keaneloans.com/2009/10/28/first-time-home-buyer-tax-credit-extended-through-april/
However, many had called for the Chancellor to go farther, by making all first time buyers exempt from the tax. Internet Banking
Yes, there is pressure from both sides to either extend, increase or end the tax credit.
The tale telling news to me is the spike in existing home sales in September. Usually September is a declining month compared to the summer months, yet we saw a huge increase in closings. Keep in mind that those figures could’ve been higher if Taylor Bean and Whitaker didn’t close in August.
We really need the extension to keep the housing market moving which is the biggest reason for the economic downturn. If we can get the extension just through June of 2010 we would have enough activity to possibly spark the economy forward. Any loss of the credit and we are back to square one and maybe even digress to the middle of 2008.
Carl The Seattle First Time Home Buyer
The credit has been relatively successful in encouraging first-time homebuyers to purchase a home prior to November 30 in Atlanta. We’ve got to keep the real estate machine moving and should seriously consider opening credit up to ALL homebuyers. By doing that, we will need to increase the amount of the credit if it is going to encourage higher income individuals to sell their existing home and buy new. Sen. Isaakson’s proposal makes sense and will probably garner more attention now since the first-time homebuyer credit has been so well received.
I have mixed feelings about extending it or expanding the amount. For my personal business, I have no doubt it would be good. However, we really have to gauge how much it will INCREASE activity.
I think the size of the credit is fine. I find more people complaining that they don’t qualify for the credit due to their income being too high or not getting the full credit because their tax bill isn’t $8,000 a year or higher.
I’m not saying this is what we SHOULD do, but I think here are a few interesting things that may help
1.) Raise income limits by $25k for first time buyers
2.) Allow the credit to be split over two years so borrowers who have $4k tax bills can still get the full credit
3.) Open it up to existing homeowners (I think this would make the biggest impact because it will help move that shadow inventory Spencer talks about on the linked video)
4.) Of course, extend it through some part of 2010. Preferrably through the buying season.
I’m not a big fan of increasing the amount unless it does get spread over 2 years instead of one. What do you guys think?
I understand your position. I do believe that if you tap dance over something like this that is intended to MOVE the market, you may get little movement and have wasted a lot of taxpayer money. If we are going to have another credit, it needs to appeal to a different demographic and it needs to be bold. Regarding the amount of the credit, the historical date we have to date reflects the opinions of mostly first-time homebuyers, who, in my opinion, were probably going to buy their first home regardless of a credit. The harder nut to crack is getting that homebuyer who already owns a home out in the market for another home. Given that purchase prices for these individuals will be significantly higher than that of the first-time homebuyer, it will take more incentive to bring them to the table. The larger the tax credit, the more likely the seller is willing to reduce their asking price and get some inventory moving. Thoughts?
Maybe. I think instead of increasing the credit, GIVE IT TO THE SELLER buy giving them the credit when they buy. I think that will do the trick.
Watch this video on YouTube
http://www.youtube.com/watch?v=aEaoIgK5xac
Listen to Spencer’s comments about the “shadow inventory” and what it will do to our growth. There is a ton of houses not currently for sale that will come on the market when the market starts to rebound. If a credit was done in a way to motivate these sellers who are often buyers/sellers, we’ll see more inventory come on the market and be priced more aggressively to move. You would see more buy/sell transactions than now instead of just first time home buyers.
Just my 2 cents