According to Senate Majority Leader Harry Reid of Nevada an extension of the $8,000 first-time-buyer tax credit is something that, politically anyway, can (and will?) be done. Additionally, by 'extension' he refers to extending the program beyond its current expiration date of November 30th, and extending the tax credit to all hombuyers, not just first timers.
While an extension of the tax-credit would be great news for buyers who are just now entering the market and could use more time to shop around, an extension also prolongs the unnatural state present in the current housing market. Currently, sales are being artificially propped-up by the tax-credit, especially in the neighborhoods and price-ranges favored by first-time buyers. If the credit is expanded to all buyers, this artificial inflation of sales volumes and prices will quickly spread to other areas and price ranges, and will persist as long as the program lasts. The problem with this is that anyone with the slightest medium or long-term perspective will know that as soon as the tax-credit ends, the pool of buyers will shrink and prices and sales volumes will drop. Maybe by then the rest of the economy will have recovered enough to pick up housing's slack, but why not just take the pain as soon as possible and build everything back up in sync?
The program was a needed shot-in-the-arm for a housing market that was dominated by fear and over-caution a year ago, but it has served it's purpose of getting buyers back in the market, and, unless Congress wants to make it permanent, it should be allowed to expired on schedule so that sales levels can quickly reach a true market equilibrium and start to build from a firm foundation based on pure supply and demand for housing. Until the government proves that it is acting decisively, predictably and consistently in regards to the housing crisis, long-term thinkers will continue to avoid the housing market - waiting for a true, non-government-influenced bottom.
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