Will the tax credit be extended? Such a hot topic right now. I would love to hear your opinions on this subject/
Many of us are wondering if the $8000 new home buyer credit (detailed below) expiring on December 1st will be extended to all home buyers, and potentially increased to $15,000. This is particularly the case if they are considering a purchase in the next few months because they must go through the whole home buying process and close before the end date. Further the stabilization of the housing market due to the 2008 credit and unprecedented success of the extended cash for clunkers program has shown that stimulus payments that directly help consumers seem to have the most impact. This means that the extension of the $8,000 tax credit for first-time buyers will be a hotly debated topic in Washington over the next few months. There is a reasonable chance (particularly if the housing market falters again) that the credit will get a second life and be extended for another six to 12 months, taking pressure off buyers, realty agents and settlement companies.
An extension of the $8,000 U.S. homebuyer tax credit is gaining support in the Senate as bill sponsor John Isakson said he is rallying lawmakers to continue a program that helped boost home sales by more than 1 million. "I'm working the floor now to make everyone aware that the $8,000 credit sunsets" Isakson, a Georgia Republican. His legislation would extend the program through the end of 2010, almost double the credit to $15,000 and remove restrictions that prohibit individuals who already own homes or earn $75,000 - $150,000 for couples - from getting the tax break. The bill, first introduced in June 2009, failed in a 47-50 Senate vote in August.
Even President Obama is reviewing an extenstion of the bill with White House spokesman Robert Gibbs telling reporters today that President's economic team is looking at the tax credit and "evaluating the impact" on new home sales. "Through that evaluation we'll come to something to give the president a recommendation," Gibbs said.
As reported in the Washington post the two biggest housing trade groups - the 1.2 million-member National Association of Realtors and the National Association of Home Builders - are mounting unusually intense lobbying campaigns to make the case for extending the credit, and maybe even expanding it (to $15,000 per the original bill). The effort is targeted first at the districts of members of the two tax-writing bodies, the House Ways and Means and Senate Finance committees, but is expected to cover most other members of Congress as well, according to officials of the two groups. Delegations of home builders and realty brokers already have begun descending on district offices, delivering what Jerry Howard, president and chief executive of the builders association, calls "the hard economic facts." They are the numbers of houses sold in each congressman's district that are attributable to the tax credit; the economic ripple effects on local businesses, manufacturers and service industries; the number of new jobs and income generated; plus the additional tax revenue that all this activity will help produce for local governments.
On a national basis, according to economists at the National Association of Realtors, anywhere from 300,000 to 350,000 additional sales of houses will be stimulated this year by the credit. Each home sale generates about $63,000 in downstream "ripple effects" elsewhere in the economy, they say. That includes sales of furnishings, appliances, lawn mowers, landscaping and renovation materials, plus moving expenses. If you accept the numbers - and some analysts consider them a stretch - this means the housing credit provides a powerful, immediate stimulus bang for the buck. Failure to extend what may be one of the most effective pieces of the Obama administration's 2009 stimulus legislation would cost jobs, economic growth and tax revenues, the housing groups argue.
But can any of this happen before the December 1st deadline? The key complicating factor here is Congress's heavy load of higher-profile, pressing issues (like health-care reform) that will get attention before anything else in September and October. On top of that, a tax-credit extension would cost billions in lost revenue - a big negative when the federal budget deficit is already wallowing in a record amount of red ink. In the end, however, given the political economics of the housing credit, the odds favor some sort of extension, probably later rather than sooner. But don't bank on it and if you are ready to purchase a home then do so sooner rather than later.
Written By Andy on Saturday
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