A while back, I discussed the first-time home buyers tax credit. With recent news on the issue, it’s time for an update.
· Fact: The $8,000 first-time homebuyers tax credit is due to expire on November 30, 2009
· Fact: Only those homebuyers who close on their home on or before November 30 will receive the credit.
· Fact: Robert Gibbs, White House Press Secretary, on October 5, 2009 made reference to the possibility of the homebuyers tax credit possibly extended.
But, as he should, Gibbs employed political-speak, an elite language reserved for earth-shaking ambiguities, and oblique announcements. The inconclusive nature of his foreshadowing leads us to the obvious question:
Will the U.S. government extend the first-time homebuyer’s credit into 2010?
Obviously, a lot is riding on this question. No matter how you slice it, $8,000 for a first-time homebuyer is a lot of cash and provides them with sufficient motivation for first-time homebuyers to go forward with a purchase. Some attribute nearly 400,000 home purchases by first time homebuyers to the tax credit. Realtors, investors, builders, and lenders, and other fiduciaries, are all equally interested in the outcome of the decision. In July, I posted information about the specific bills being considered in Congress on extending the home buyer tax credit.
Some proposals go beyond merely extending the original tax credit. Some congressional lobbyists have proposed raising the credit to $15,000, opening it up to any homebuyer (even if they aren’t a first-time homebuyer), removing the income restrictions for eligibility for the tax credit, and making it available for an additional year. North Carolina’s Howard Coble (R-6th District) is one of the strongest proponents for a tax credit of this nature.
To help answer the question of whether or not it will happen, let’s stack up some evidence on either side.
Evidence in favor of extending the tax credit:
1. Robert Gibbs’s comments, most naturally understood, would lead us to believe that Congress does plan to extend the tax credit.
2. No less than three proposals, all from bipartisan sources, have been submitted in the past three months proposing a higher tax credit ($15,000) or maintaining the current credit into 2010.
3. Extending the credit will most likely improve the condition of the housing industry, which is a dire economic need. An improved housing industry will contribute to an overall revitalized economy.
4. Maintaining the tax credit is the only way to sustain the upward momentum that the first tax credit introduced.
Evidence against extending the tax credit:
1. Maintaining the tax credit will contribute to reduced taxes, which puts a cash-strapped, spend-happy government even further behind economically.
2. With so little time to decide, Congress’s default answer may just be “wait” which sounds very much like “no.”
The discussion of these proposals will most likely become front-burner topics as the November 30th deadline looms closer. No, we will not find unanimous agreement, for or against, so your guess is as good as anyone’s. What will it be? Personally, I would like to see the credit extended at the $8,000 or $15,000 level and apply to all home purchases. This will help the move-up or move-down buyer. If this type of credit is put in place, it may make sense to cap the purchase price of the house to provide the biggest incentive to the people that need it most.
If you believe that the tax credit should be extended in some shape or form, I encourage you to write your Congressional representatives.