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