The $15,000 homebuyer tax credit didn’t survive the final negotiations on the stimulus bill.
Reportedly - Congress slightly increased to $8,000 an existing $7,500 credit for first-time homebuyers and eliminated repayment provisions.
Please note that the $8,000 number isn’t yet finalized. It may turn out to be $7,500.
The move is sure to disappoint those who had favored a more generous $15,000 credit for all home buyers in the Senate bill.
The new credit is retroactive to Dec. 31, 2008, which means that anyone who buys a house this year, through August, won’t have to repay it. The legislation extends the effective date of the tax credit, which is for up to $7,500, to September 1 from June 30. Households that purchase in 2009 using financing assistance from state and local mortgage bonds will be permitted to use the credit as well.
First time buyers who used the credit in 2008 still have to pay it back over a 15-year period.
The real-estate industry had closely followed the tax credit debate, hoping that a larger credit would make potential buyers more comfortable at a time when declining values and rising job losses have scared off buyers.
“Washington needs to do more at compensating home buyers for the now considerable danger of yet lower home prices,” writes John Lonski, chief economist at Moody’s Investors Service. “The near-term stabilization of either the economy or the financial system may be impossible until the now 5.25% 30-year mortgage yield falls to something no greater than 4.5%, and even the latter may prove to be too costly.”
Comment -- I agree with Mr Lonski - and have been saying that for some time..... Rates need to drop. When will the politicians get it? In fact - I called the Fed in early 2006 telling them to get rates dropped somehow - or they will create the biggest financial disaster in US history since the Great Depression. (Ben Bernanke's office didn't listen of course.... His secretary told me "Don't worry - Mr. Bernanke knows what he is doing..." I told her - I don't think he really does...and informed her that I was seeing the impact already...)
Interest rates edged up slightly at the end of January, and mortgage applications for new homes fell 14% during the four week period ending Feb. 6 from the previous four weeks.
Comment - Home Buyers -- does the slimmed down tax credit change your home buying plans? (I don't think so....)
Other provisions reportedly in the bill that could help housing markets and communities include:
* FHA and conforming loan limits. Specifics have not been released but reports indicate that the 2008 limits have been reinstated for 2009 except in those communities where the 2009 limits are higher. Additional increases in individual communities may also be available at the discretion of the secretary of the U.S. Department of Housing and Urban Development.
* Foreclosure mitigation and neighborhood stabilization. Funding for states and localities to be used for neighborhood stabilization activities for the redevelopment of abandoned and foreclosed homes are authorized. Some news reports put the funding level at $2 billion.
* Rental assistance. Up to $1.5 billion to provide short-term rental assistance and other aid for families during the economic crisis.
* Transportation infrastructure. Up to $29 billion for highway construction projects, $8 billion for rail projects, and $5 billion to weatherize low-income homes.
* Rural housing development. Increased funding for the Rural Housing Service direct and guaranteed loan programs.
* Low-income housing grants. Allow states to trade in a portion of their 2009 low-income housing tax credits for Treasury grants to finance the construction or acquisition and rehabilitation of low-income housing, including those with or without tax credit allocations
* Tax-exempt housing bonds. Tax-exempt interest earned on specified state and local bonds issued during 2009 and 2010 will not be subject to the Alternative Minimum Tax (AMT). In addition, financial institutions will have greater capacity to purchase tax-exempt state and local bonds
* Energy efficient housing. Grants for energy retrofits for federally assisted housing (Section 8), funding for energy efficiency and conservation block grants to states, and Increases in the residential tax credit through 2010 for certain energy efficient upgrades.
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