The federal government's extension and expansion of the home buyer tax credit is a "necessary evil" to keep the still-vulnerable housing market from regressing, analysts say.
"We see some signs of recovery, but there are still dark clouds overhead," said Nicolas Retsinas, director of the Joint Center for Housing Studies at Harvard University. "We still have the foreclosure problem and people are still losing jobs. I think it's a little dangerous to pull the plug now, but I do think the government needs to plan its exit strategy."
The tax credit, along with more affordable homes, has helped boost sales over the past year. The Internal Revenue Service says more than 105,000 Floridians have applied for the credit so far, but that number also includes those who applied for a smaller credit last year.
The $8,000 credit, which was set to expire Nov. 30, will be extended for first-time home buyers under contract by April 30, but they must close the sale within 60 days. They have to remain in their new homes for three years or otherwise repay the credit.
Couples earning up to $225,000 and individuals up to $125,000 qualify for the break. The previous income limits were $150,000 for couples and $75,000 for individuals.
The new plan also is designed to spark interest in the sagging "move-up" market. Repeat buyers are eligible for a $6,500 credit if they have lived in their prior homes for at least five years.
"The success of the original program speaks for itself," said Richard Barkett, chief executive of the Realtor Association of Greater Fort Lauderdale. "If they didn't extend it, it definitely would stymie our real estate market. An incentive is always nice to help stimulate decision-making."
Brad Hunter of the Metrostudy housing research firm in West Palm Beach called the extension a "necessary evil." He said it will encourage buyers to act sooner, hurting next year's housing demand. And it will reward people who would have bought homes anyway.
"Overall, it's lousy policy, but it's the best we've got," Hunter said.
Douglas Rill, broker/owner of Century 21 America's Choice in West Palm Beach, said the government should continue letting the market correct itself.
What's more, Rill doubts the expansion will help much because repeat buyers are stuck in homes that are worth less than their mortgages.
"So many people are 'underwater,' and they won't be able to take advantage of this," he said.
Marisa DiLenge, a real estate agent in Broward County, disagrees.
"Not everybody is underwater on their mortgage," she said. "People who purchased their homes many years ago will want to upsize or downsize, and now they will be able to get a rebate."
Lawmakers have said they won't extend the tax credit beyond the April 30 deadline. But Barkett isn't so sure they won't reconsider.
"I think they'll do whatever is needed to move us in the right direction," he said.
Paul Owers can be reached at powers@sunsentinel.com or 561-243-6529.
Comments(2)