The much-anticipated $15,000 tax credit for homebuyers has been scaled back to an $8,000 tax credit for first time home buyers only.
A few days ago, following extensive lobbying in Washington, home builders and realtors had hailed the proposed $15,000 tax credit. Charles McMillan, President of the National Association of Realtors, had indicated that the credit might lead to 1 million additional home purchases. Toll Brothers' CEO, Robert Toll had said, "The $15,000, I have no doubt, will make the greatest difference." Pulte Home Builders' CEO, Richard Dugas was urging Congress to push the credit up to $20,000 or more and Centex's Timothy Eller had commented, "We have to absolutely stimulate the demand side of housing in order to begin to provide some price support for the prices that are continuing to decline and, of course, absorb these continuing foreclosures."
The budget for the $15,000 tax credit plan was priced at $35.5 billion. The revised credit will be close to $3.7 billion, a substantial reduction.
This about-face by the government could cause a temporary setback in the minds of some homebuyers. People who had expressed excitement about the $15,000 tax credit may now re-evaluate their plans.
The purpose of the tax credit was to spark people who are sitting on the sidelines to enter into the market and a buy a home now rather than to watch our inventory of unsold homes grow larger. The $15,000 credit, extended to all buyers, could have gone a long way toward stimulating the housing market.
For now, the highlights of the revised stimulus plan will provide the following housing-related provisions:
- The current Home Buyer Tax Credit for first-time buyers, which had been essentially a 15-year loan, will now become a true credit and will not have to be paid back. The amount of the credit is 10% of the purchase price or $8,000, whichever is less.
- The maximum loan amount limits for Freddie Mac, Fannie Mae and FHA loans will return to what they previously were last year which will allow buyers of higher-priced homes to obtain financing at conforming rates.
- State governments will receive funding to offset some of the impact of the current foreclosure situation.
- Homeowners who install energy-efficient items such as new doors, windows and furnaces could get up to $1,500 in tax credit.
Considering the fact that the meltdown in the financial sector was driven by the collapse in housing, it is surprising that the response from government has been so tepid.
Are these measures enough to help the ailing housing market?
Copyright 2009 - Claudette Millette, President, TheBuyersCounsel - 800-392-1446, E-mail Ashland, Holliston, Hopkinton, Natick, Newton, Northborough, Framingham, Sherborn, Southborough, Sudbury, Wayland, Westborough
Copyright 2009 - Claudette Millette, President, TheBuyersCounsel - 800-392-1446, E-mail
Ashland, Holliston, Hopkinton, Natick, Newton, Northborough, Framingham, Sherborn, Southborough, Sudbury, Wayland, Westborough