The Home Buyer Tax Credit Expiration – The Pressure is Mounting!

By
Real Estate Agent with The Buyers' Counsel

Hourglass on MoneyCongress is currently debating bills that could possibly extend the $8,000 first-time home buyer tax credit which is set to expire on November 30.  Is this a good idea?

In considering whether or not they should to do it, the following questions need to be asked: 

 -  Has this tax credit program worked to help the sagging housing market?

  • -   Will the cost of extending it be worth the benefit we will receive from any further implementation of it?

Mark Zandi, chief economist of MoodysEconmy.com has devoted some serious study to the situation and he is in favor of extending the credit.  He would like to see run until June 1, 2010 and be made available to all home buyers with no income restriction, with some exceptions for those at the highest end of the income scale.  

His estimated price tag for this extension is $30 billion over the next ten years. 

Zandi's reasons include the fear of rising foreclosures due to the unemployment numbers, noting that this will drag prices down even further.  It is his contention that six more months of the tax credit will help to mute the decline in prices and, by June, the job market will have improved. 

The National Association of Home Builders is pushing for the tax credit to be extended for all of next year.  They estimate that it will increase home purchases by 383,000 next year.  The net effect of this will be to bring down the inventory of houses on the market which will provide much-needed help with the potentially increasing foreclosure crisis. 

NAHB Chairman Joe Robson stated, "This stimulus alone would create nearly 350,000 jobs over the coming year, which is exactly what the economy needs right now." 

The National Association of Realtors is very much in favor of extending the credit.  In September, NAR Chief Economist, Lawrence Yun said that the tax credit is working.  He has also stated that there is a fear that if the tax credit is allowed to expire, the housing market may begin to "roll down again." 

Senator Johnny Isakson made the case in Congress yesterday to support his proposal for an extension and expansion of the program. He pointed out that since the first-time home buyer tax credit has been in effect, an estimated 350,000 sales were made which are 357,000 sales that would not have taken place without it. 

Isakson is pushing for extending the deadline for the existing $8,000 tax credit from November 30, 2009 to June 30, 2010.  This would be, in effect, an effort to prop up the real estate market to take some of the anxiety out of the slowest selling season of the year.  He is also proposing to expand the program to all home buyers with a cap of $300,000 income for married couples. 

Right now, there is a great deal of fear that if the tax credit rug is pulled out from under us at this point, the housing market is destined to fall into an abyss.   

The question may be - is this a sound decision that will bring about an effective result or is it being done simply out of fear of what will happen if we do not do it? 

Related Posts:

Support for Extending the Home Buyer Tax Credit is Rapidly Growing

Extending the $8,000 tax credit

Using the Tax Credit as a Down Payment on a Home

Taking Advantage of the $8000 First-time Home Buyer Tax Credit

Update - the $15,000 Home Buyer Tax Credit Cut from the Stimulus Bill

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Copyright 2009 - Claudette Millette, President, TheBuyersCounsel - 800-392-1446  - E-mail    

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Re-Blogged 5 times:

Re-Blogged By Re-Blogged At
  1. Frank Godfrey 10/16/2009 02:56 AM
  2. Frank Godfrey 10/16/2009 02:57 AM
  3. Ryan Bokros 10/16/2009 03:07 AM
  4. Dana Devine 10/16/2009 04:20 AM
  5. Patty Mortara REALTOR CRS | Hunterdon County (NJ) 10/19/2009 05:48 AM
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Rainer
38,588
Jerry Gray
Wilkinson ERA Real Estate - Winston-Salem, NC
Serving the Triad Since 1980

Claudette...I am in favor of extending the tax credit for everyone, but must come out of the stimulas money already approved. The stimulas money was used for pork paybacks. The stimulas should be used for true jobs, and turn housing around.

 

Jerry Gray CRB,CRS,GRI / Prudential Carolinas Realty / Winston Salem, NC

Oct 16, 2009 02:44 AM #4
Rainer
22,949
Pete Buckley
Independent Broker/Realtor, North San Diego County CA. - Del Mar, CA

I'm not a fan of the credit. Why should every taxpayer be burdened by this to help so few?

FNMA got involved in "helping" buyers get loans they should not have gotten and we're in quite a mess because of it.

If the program was for anyone who SOLD to a first time buyer AND then bought up, that would have a much broader impact.

Oct 16, 2009 02:46 AM #5
Rainer
17,403
Bryan Griffis
Chapman Realty - Brunswick, GA
Realtor Homes in Brunswick, GA., St. Simons Island, and Glynn County

We have had a tremendous number of people qualify for and specifically state that the tax credit was a motivator in their purchase.  I think that an $8000 extension would suffice if it were to include all buyers regardless of income and homeownership.  At Chapman Realty, we represent a lot of builders.  The tax credit in addition to being able to purchase a new home at competitive prices has led to a good, strong number of sales in the past year.  If the tax credit were ended, I am afraid that a good bit of business in this area would as well.  That hurts everyone; builders, agents, subcontractors, insurance companies, builder's supply companies,...

Oct 16, 2009 02:57 AM #7
Rainer
65,784
Steve Hubbell
EXiT Realty Chesapeake Bay - Chesapeake City, MD
Realtor, Waterfront Specialist

I was wondering the same thing the other day in my post and think more of this is how the politicians want to get re-elected and not that it helps the industry. In fact if we look at history, the auto industry got hooked on "rebates" years ago and each time they tried to stop them, sales tanked...Let the Market correct itself....Why delay the inevitable...lets get to the real bottom, and get on the other side of this problem.....

Oct 16, 2009 02:58 AM #8
Rainmaker
117,024
Jason Burkholder
Weichert, Realtors - Welcome Home - Lancaster, PA
Associate Broker, Realtor, e-Pro, CMS

Thanks for the info, I like the Moody's ecnomist viewpoint, I had not yet seen that, but it is expert opinions like that that will drive legislators to extend it

Oct 16, 2009 03:31 AM #9
Rainmaker
403,659
Claudette Millette
The Buyers' Counsel - Ashland, MA
Buyer, Broker - Metrowest Mass

Jerry & Pete:

I also feel that, if it is extended, it should be expanded to include all home buyers, not only first-timers. I think it was short-sighted to make it only be for first time home buyers. 

Bryan:

It is good that the tax credit has helped your area but it has to end at some point.  Or, do you think it should be made permanent, much like the mortgage interest deduction? It would be expensive but I am sure that there are some people who might be in favor of that.

Steve:

I think that is right on point - the politicians are going to be too afraid to let this expire right now. 

Jason:

They are probably listening to the experts to a certain degree, but also to the lobbyists from NAHB and NAR who are working to keep it going.

 

Oct 16, 2009 04:23 AM #10
Rainmaker
545,096
Toula Rosebrock
Diane Turton, Realtors, Forked River, NJ - Lacey Township, NJ
Broker/Sales Associate, Realtor, Lacey Township,

ToulaRosebrock,com

Hi Claudette:

I've spoken with several buyers who are anticipating the extension and have put off their buying for now...

To me, that's a huge gamble.

Oct 16, 2009 04:36 AM #11
Rainmaker
403,659
Claudette Millette
The Buyers' Counsel - Ashland, MA
Buyer, Broker - Metrowest Mass

Toula:

I think you are absolutely right.  It is a gamble.  Regardless of what they are attempting to do, you cannot be sure of anything until it actually happens.  It looks like they will probably extend it, but, with politics - who knows?

 

Oct 16, 2009 04:46 AM #12
Rainmaker
1,431,210
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

This issue has been beat back and forth a lot here on Active Rain.  Some of us are for it and others see it as more government waste.  I prefer big across the board tax credits.  We are not going to get them from this President and Congress so I will take the tax credit.

Oct 16, 2009 04:50 AM #13
Rainmaker
782,105
Mike Bjork
Pinnacle Home Loan - Redondo Beach, CA

As much as I think it's helping our Profession in the Short-term, I think it's hurting everybody (us and outside of our Profession) in the Long-term.  It's a very big expense for a long time ($30 Billion over 10 years), and to add that to the other parts of the "so-called" Stimulus that will probably be sticking with us for the rest of our lives.  I'm tired of hearing about all of their spending.  There are a lot of Programs available that I don't see people taking advantage currently, namely the NSP (Neighborhood Stabilization Program), which is Federal money being disbursed to the major Metropolitan areas around the country to assist the Stabilization of Foreclosures within specific Neighborhoods.  I've found some of these properties to be actually decent (not the type you may be thinking, destroyed and only in the worst neighborhoods).  For Los Angeles, you can receive up to $50,000 Downpayment and don't even need to be a First Time Home Buyer.  Right now, I just see the $8,000 Tax Credit as Artificially Inflating the Entry-Level Homes.  I'm seeing homes (under $450,000, entry-level in Los Angeles) selling for $20,000 - $100,000 above asking price.  Because of this issue, we are also seeing Listing Agents refusing FHA offers on their listings (from my understanding, they want to see the client have more money).  Also, the more Congress is spending, then they will only add more regulation to our Professions (which everyone is already complaining about the HVCC and TILA regulations).  Because they don't know anything about our Professions, then these new Regulations will only prevent us actually getting out of this mess earlier.

Oct 16, 2009 04:59 AM #14
Rainmaker
403,659
Claudette Millette
The Buyers' Counsel - Ashland, MA
Buyer, Broker - Metrowest Mass

Gene:

I agree.  It certainly has been beaten about here.  Sorry to beat it to death, but I still find it a bit interesting to see what is going to happen next. 

 

Oct 16, 2009 05:00 AM #15
Rainer
17,403
Bryan Griffis
Chapman Realty - Brunswick, GA
Realtor Homes in Brunswick, GA., St. Simons Island, and Glynn County

Claudette,

I think it should have an ending date, maybe somewhere around next summer but no later than the end of next year.  The market isn't quite stable yet, and a little more encouragement may do the trick.  Everyone seems to get on this kick about spending so much to help so few.  But of all the governement spending in the past several years, name one program that has the potential to help so many.  Not only buyers, but also sellers, builders, subcontractors, supply stores...and if people spend the money on new t.v.s, then good for the employees of those stores as well.  As far as I can see, this has the best opportunity to do the most good for the most people.  I hope that plot line doesn't get lost in the bigger story.

Oct 16, 2009 05:04 AM #16
Anonymous
Anonymous

Make it Rain congress!

Oct 16, 2009 06:41 AM #17
Rainer
32,824
Ben Giordano
RE/MAX Sun & Sea - Boca Raton, FL

I think the impact of the 8k credit has been at best minimal in most markets... Not sure its expiration will have any significant impact... This was just a band aid and an incentive for most first time home buyers who would have still bought anyway...

Oct 16, 2009 07:06 AM #18
Rainmaker
1,543,065
Lyn Sims
RE/MAX Suburban - Schaumburg, IL
Schaumburg IL Real Estate

I did a post last week - it added 357,000 buyers so far.  I'm tired of talking about it, let's just go sell something!

Oct 17, 2009 08:02 AM #19
Rainmaker
403,659
Claudette Millette
The Buyers' Counsel - Ashland, MA
Buyer, Broker - Metrowest Mass

Lyn:

I hear you.  However, this issue is not going away. Here is the latest:

http://blogs.wsj.com/developments/2009/10/15/home-buyer-tax-credit-wont-die-quietly/

To be continued...

 

Oct 17, 2009 11:27 AM #20
Rainmaker
1,543,566
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

I think ALL of the bail-outs (in their various forms) from the first one right through cash for clunkers were bad ideas.

The government should remove its nose from private enterprise. This housing crisis all started with the government interfering and insisting that people who couldn't afford houses must be allowed to buy.

Oct 17, 2009 07:53 PM #21
Rainmaker
242,066
Jenny Durling
L.A. Property Solutions - Los Angeles, CA
For Los Angeles real estate help 213-215-4758

I seriously want the tax credit to go away unless they increase the amount, make it available to EVERYONE and get rid of the income limitations. In Los Angeles there is very little property that's cheap enough to fit the bill and those are mostly REOs that would get sold anyway.  It's simply created alot more unhappy buyers who can't seem to get their offers accepted over the other 25 people trying to buy the same house.

Oct 18, 2009 05:10 AM #22
Rainer
47,697
Al Dobbs
ADD Real Estate - North Chicago, IL

I hope that it is extended. I have people in the pipeline that maynot be able to make that Nov. deadline. It also help our business. Without the credit and the investors; there would not be many sales.

Oct 20, 2009 04:29 PM #23
Rainmaker
199,540
Mark Velasco
Sharpstone Realty, Inc - Whittier, CA
Listing Agent-Whittier & Surrounding ciities

Claudette. I am all in favor of the extension. However, we need to be responsible to future taxpayers as well. This is not free money.

Oct 20, 2009 04:56 PM #24
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Claudette Millette

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