Homebuyer Tax-Credit Extension Gains Lawmaker Support
By Dawn Kopecki
Sept. 16 (Bloomberg) -- An extension of the $8,000 U.S. homebuyer tax credit is gaining support in the Senate as bill sponsor John Isakson said he is rallying lawmakers to continue a program that helped boost home sales by more than 1 million.
"I'm working the floor now to make everyone aware that the $8,000 credit sunsets on Nov. 30," Isakson, a Georgia Republican, said in an interview today. The former real estate executive says he is "talking to everybody and anybody."
Realtors, bankers and homebuilders have joined in the push, starting a campaign that encourages Congress to extend the program for one year with the tag line: "Don't Let America's Real Estate Recovery Expire." Executives including Fannie Mae's Michael Williams and Hyperion Partners LP's Lewis Ranieri have attributed improvements in home sales and prices to the credit, and Isakson said he is worried the market may suffer without it.
"If you take that kind of business out of what's already a very weak housing market, you do nothing but protract and extend the recession," Isakson said. December "marks the beginning of the historical worst time for home sales," he said.
White House spokesman Robert Gibbs told reporters today that President Barack Obama's economic team is looking at the tax credit and "evaluating the impact" on new home sales.
"Through that evaluation we'll come to something to give the president a recommendation," Gibbs said.
A Tough Sell
Isakson's legislation would extend the program through the end of 2010, almost double the credit to $15,000 and remove restrictions that prohibit individuals who already own homes or earn $75,000 -- $150,000 for couples -- from getting the tax break. The bill, first introduced in June, failed in a 47-50 Senate vote in August.
The bill has at least 15 co-sponsors including Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, and senators Patty Murray, a Washington Democrat, and Joe Lieberman, a Connecticut independent.
Mark Weinberger, an Ernst & Young LLP vice chairman who negotiated President George W. Bush's tax cuts while working at the Treasury Department in 2001, said extending the homebuyer credit will be a tough sell in Congress with budget deficits exceeding $1 trillion.
"Even the most routine extenders are going to be under additional scrutiny," he said, referring to a collection of dozens of other temporary tax breaks that are renewed every year or so. "Even if it's extremely popular, it's going to have to be matched up with something unpopular" such as a tax increase on other Americans to pass, Weinberger said.
"You can't take it for granted in the current budget situation," he said.
Effect on Sales
Existing home sales jumped 7.2 percent in July to the highest level in almost two years, while new home sales increased 9.6 percent, according to Realtors and Commerce Department data. An S&P/Case-Shiller index of homes prices in 20 U.S. metropolitan areas showed the first month-over- month increases in values since 2006 in May and June, reducing the average decline from the 2006 peak to 31 percent.
"It is having an impact in lifting sales and reducing inventory, which will help stabilize home prices," Lawrence Yun, the National Association of Realtors' chief economist, said in an interview. "Stabilizing home prices is key to economic recovery, because that means bank balance sheets will not bleed and consumer confidence will improve."
Yun estimates that about 350,000 home sales through August were directly attributable to the tax credit, which has been used in 1.2 million home purchases so far this year.
Tapering Off
The Realtors group teamed up with the Mortgage Bankers Association and National Association of Home Builders in buying advertising this week and next in Washington newspapers including Roll Call and Politico.
Because most loans take as long as 60 days to process, mortgage bankers worry that volume will start tapering off early next month, said Steve O'Connor, the chief lobbyist for the Mortgage Bankers Association. "At some point, they're going to stop taking applications on tax-credit loans unless the tax credit is extended," he said.
Ranieri, a mortgage bond pioneer at New York-based Salomon Brothers in the 1980s, said in a Sept. 15 interview that the tax credit has helped, along with other government programs, in stabilizing the housing market.
Prices on homes financed by Fannie Mae and Freddie Mac were up last quarter, attributable to borrowers taking advantage of the $8,000 credit and more affordable home values, Williams said in a Sept. 9 speech in Washington.
Last Updated: September 16, 2009 17:34 EDT
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