From a blog by Regis Skeehan, President of Piedmont Personal Builders.
Senator Chris Dodd (D-Connecticut) was quoted in Investor's Business Daily yesterday that there is now a deal in place among top democrats to extend the home buyer tax credit.
This follows on recent statement on October 26, 2009 from Senator Bill Nelson (D-Florida) reported by Bloomberg that the program would be extended "Later this week." Senator Nelson made the
President Barack Obama
statement while travelling on Air Force One with President Barack Obama to attend a speech in Jacksonville. President Obama has previously said that he will sign the home buyer tax credit extension if it reaches his desk.
We previously expressed doubt that the tax credit would get extended before its November 30, 2009 expiration date. Looks like we may be wrong.
Rumors are that the program extension would eliminate the first-time buyer restriction and allow "Step-Up" buyers who have lived in their current homes for at least 5 years to participate. The new tax credit would be for 10% of the home's purchase price with a cap of $7,290. Income limits for first-time buyers would remain at $75,000 for individuals and $150,000 for couples. Step Up buyers would have income limits of $125,000 and $250,000, respectively. The credit would be limited to homes costing under $800,000. Homes must be under contract by April 30, 2010 and closed by June 30, 2010.
Exactly how this bizarre bucket of terms and conditions will play out is yet to be known. However, at best it's another half measure. Her are some potential problems with it:
1. What if you only owned a previous home for 2 years, or 4 years? Does that mean you don't qualify for the credit?
2. What if you owned a home for over 5 years, but just sold it to move to, say, Houston to take a new job. Now you no longer own a home and you are not a first-time buyer. Does your new home in Houston qualify for the credit?
3. What if you already wrote a contract to have a new home built before passage of the law, but it won't be completed till, maybe, February. Does your new home qualify?
Also, because of the short expiration date on the new program, this program will almost completely exclude the purchase of a new, custom-built, single-family home to be built to order for a buyer.
While there are a few Sun-Belt locations where a small, SF home can be built quickly, typically, a new custom home in most of the country takes about 8-to-9 months to complete from the date of contract.
How to fix that? Allow 2 months after contract to close on an existing home or completed builder's spec home, but allow, perhaps, 9 months to complete a home to be built.
Without such a provision, this extension will only help increase the sale of existing homes and builders' specs. This will create few new housing starts. Dont get me wrong, something is better than nothing. But it's another half measure.
Building New Homes Creates Jobs
Why worry about new homes to be built? Because that's where the jobs are. Very few jobs are created when an existing home or a builder's is sold. Amost all of the labor to build it was already incurred and paid for long ago.
But a new home has to be built, creating jobs today.
Comments(1)