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Extending the $8k First Time Home Buyer Tax Credit

By
Real Estate Agent with Property Executives Realty

It's been about a year since the financial meltdown including:  Uncle Sam's takeover of Fannie and Freddie, the sale of Merril Lynch, and the downfall of Lehman Brothers.  Though signs of optimism in the housing market are looming.

In the Twin Cities Market, pending sales are up for over 14 consecutive months vs this time last year.  Even though home prices are down, so is inventory, and buyers are coming out of the woodwork to cash in.  Is this directly linked the the $8k first time home buyer credit?  No one knows, but it's sure seems like the housing market is well past the bottom and I can finally see a light at the end of the tunnel. 

Here's where we are today:  In effort to stimulate the housing demand, Obama bumped the $7500 tax credit (which required a repayment) up to $8,000 and required no repayment.  Though only first time buyers could qualify for this credit, which limited the potential to get the biggest bang for the buck. 

Granted, the tax credit is only one of a number of factors that have worked to bolster the housing market in the past year.  Even more important than the tax credit is that homes are more affordable today than they were just a year ago, and down 30 percent from the second quarter of '06.  Plus you add in interest rates at all time record lows, there's going to be the demand.  The $8k is just icing on the cake. 

Here's the issue:  The first time home buyer credit is due to expire on December 1st 2009.  If there's any chance to get out of the mess, that government initiated in the first place, they're going to have to either extend the credit or add to the current credit to make it even more attractive.  We need to get those buyers off the fence and buy homes.  There is still a lot of bank owned inventory and there will be more coming down the road.  If we do nothing, it will take the wind out of all the progress that we've worked at so hard to get us where we're at today. 

What's next:  Although the credit doesn't expire until December 1st '09, buyers only have until about the second week of October to have a contract in place to close by November 30th.  So what's next you ask?  In the face of this looming deadline, housing and real estate interest groups have steeped up their efforts to convince lawmakers to extend the credit.  I've heard talks of $15,000 tax credits given to all buyers, not just first time home buyers.  Though there are a lot of concerns about budget deficits and rising government spending.  Is the tax credit just a temporary fix for the housing market?  What if we pull the plug on it now?  Why does goverment have to step in on the private market?

Here's what I think:  I think lawmakers will eventually extend the tax credit in one form or another.  I don't think that come December 1st, we're on our own.  I feel something will be done, but that's left to be unseen at this point in the game. 

This is what I would do:  I would love to see the market correct itself and for government to back off, but that may be devastating to the industry.  I'm in the heart of the industry so I have to look out for my own butt here too.  So I would hope they extend the credit, by keeping the $8k at $8k, or even raising it to get one last big push.  Here's what I would change:  Make the tax credit available to everyone, not just first time home buyers.  There are a lot of folks that bought five years ago that are suffering because their priced out of the market.  Make it easier for those people to move on with their lives and get a piece of the pie as well.

I guess we'll see what is going to happen in the next couple of months.  It's going to be a long ride to get back to a good market, but my seat belt is tightly fastened, and I'm ready for what lies ahead....

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