While an extension of the November 30, 2009, deadline for the homebuyer tax credit is actively being considered, it’s not a done deal quite yet. In the meantime, it bears noting what the first time home buyer tax credit has done and continues to do for the real estate market.
Almost 50% of all houses sold last year were bought by first time buyers with the help of the tax credit which was passed earlier this year as part of the economic stimulus package. This has been a huge boost for the housing market. With qualifying income (less than $75,000 for singles and $150,000 for couples), the credit, which does not have to be repaid, is good for up to $8,000, or 10% of the purchase price. Both first time buyers and those who have not owned a home in the previous three years are eligible.
The National Association of Realtors attributes much of the recent home sale activity to the first-time buyer tax credit. It estimates that 1.8 million buyers will file for the credit. Of those, 350,000 would not have been able to buy a home without it.
With the incentive deadline looming, some market analysts fear that the rise in home sales will take a sharp decline once the tax credit expires. The expiration date of November 30th applies to closing date, which means that home buyers just starting the process now will not benefit from the tax credit.
On the other hand, there is a growing contingency of support for extending, and even expanding, the buyer’s incentive. For example, Johnny Isakson (R-Ga.) is a former real estate broker who is pushing legislation to extend the tax credit through next year, increase it to $15,000, include non-first-time homebuyers, and remove income restrictions. Others, like Senator Majority Leader Harry Reid and Senate Finance Committee Chairman Max Baucus have proposed the extension of the home buyer’s tax credit through 2010 in which the full $8000 will be received. The tax credit would then be reduced by $2000 each quarter until expiring at the end of 2010.