Home buyer tax credit expected to be extended and expanded
11/06 UPDATE: President Obama has signed the bill and it is effective immediately. For complete details, click here.
11/05 UPDATE: House of Representatives has passed the bill 430 - 12 and President Obama is expected to sign it on Friday.
11/05 UPDATE: Included as part a bill extending jobless benefits, the Senate has passed the bill 98 - 0 and it will now go to the House of Representatives where it is expected to be passed and then signed by the President.
10/29 UPDATE: Income limits changes to be $125,000 for individuals and $225,000 for couples, tax credit changes to be lesser of 10% of purchase price or $8,000 for first time home buyers and $6,500 for qualifying existing home buyers. It has not been passed or signed as yet.
It appears that the home buyer tax credit will be extended and expanded according to Bloomberg. Please note that the bill has not been finalized and has not been signed but I'll update here as more information becomes available.
Here are the details so far:
The home buyer tax credit will be extended from December 1, 2009 and eligibility will be expanded to include current home owners who have lived in their current residence for a minimum of 5 years.
Income eligibility remains the same for first time home buyers at $75,000 for individuals and $150,000 for couples and is $125,000 for individuals and $250,000 for couples for qualified home owners who sell their current home and either move up or downsize.
The tax credit is the lesser of $7,290 or 10% of the purchase price. (You can only wonder where the government comes up with numbers like this.)
The tax credit runs from December 1, 2009 through contracts signed by April 30, 2010 with an additional 60 days to close the sale by June 30, 2010.
Criticism
There has been a lot of criticism of the first time homebuyer tax credit and many have said that it is an ineffective and poorly targeted stimulus and that the real cost per additional home sold is far more than the value of the tax credit.
An especially thoughtful but critical article was written by Simon Johnson and James Kwak in the Washington Post. They contend it is throwing good money after bad and is basically a bad idea.
Positives
On the other hand, the government has been known to do this sort of thing and housing is certainly a key component of the economy. And it has helped to stabilize the housing market. In the Charleston real estate market, September marked the first monthly year over year sales increase since February 2006.
And while I have mixed feelings on the subject of governmental interference in the markets, the extension and expansion of the tax credit will certainly help tide the housing market through the slower months of the real estate calendar. As I commented last evening on Facebook,
“while I believe that housing still needs a stimulus and not just a first time homebuyer credit which has probably been exhausted but a credit for existing homeowners who might like to move up or downsize, I think we're generally better off when Congress is on recess and the President is overseas doing something or other.”