Remember, like any bill, it has the chance to get modified along the way to the President's desk. I'm not quite understanding the reasoning behind the 5 year rule, though. So they're rewarding the people who bought pre-bubble, and probably have significant equity in their current home, yet penalizing those who bought DURING the bubble ? That doesn't quite make sense to me. Why not just open it up to all primary residence buyers ?

I have sent correspondence to our Senators and hope everyone is inclined to do the same.

I suspect your poll has been infiltrated by industry insiders with vested interests.

Mr Rational may be correct, although some of the comments reek of overleveraged souls desperate to vent.

Why does Congress always have to complicate things???

We had a simple formula that seemed to be working (at some level) and it's turning into a complicated mess (multiple versions and ideas for new expiration dates, income qualifications, first-time and step-ups requirements, etc). HSH originally proposed extending it for as long as the Fed is buying agency MBS -- and that is slated to expire at the end of March. Don't the two go hand-in-hand? I think so.

Furthermore, how come cost hasn't entered into the equation? There have been estimates that so far the tax credit has taken up about $10 billion in tax revenue, another that Sen. Isakson’s proposal is slated to cost about $16.7 billion through June, and another that the extension will run $1 billion/month.

If we're spending this much, it better be worth it. Lawmakers should have kept it simple.

I have to say that as a first time homebuyer, I'm glad to see the credit extended. By the time they announced the credit earlier this Spring, we were already locked into a 12 month lease (ending in December). We've found a perfect home that we can easily afford, but it's a short sale. We're at the mercy of the banks to close by November 30th, and an extension would mean a lot to my mental sanity.

That $8000 will go to pay off existing credit card debt and buy home furnishings. That's money straight back into the economy.

EVeryone should stop and pause to think where this money comes from. The most insidious tax is the tax of inflation. It erodes the purchasing power of fix income individuals, and benefits the banks who are closest to the Fed spigot of free money. This bill is another government step to prop up the banks whose balance sheets are fairy tales. Why don't we wake up and see what this is really about.

I'm disappointed with Obama, he seems to be supporting the status quo, and condones this underhanded way of pick the pockets of ordinary people. The Dems and the GOP are all in this together by the way.

I also am very frustrated with the 5 yr requirement. My wife and I have been waiting and waiting for the announcement only to hear that you have to have lived in your current house for 5 years. We're at 3.5 years and would buy a new house in an instant if we qualified. Now we're stuck. It's bad enough that we got nailed by the bubble with the value of our home dropping but then on top we can't even qualify for the Home Buyer Credit...what a crock.

I agree with extending the tax credit; a tax credit however will not fix the root cause of this whole mess - foreclosures. Wouldn't it make for sense for the government to stop allowing banks to sell distressed/foreclosed properties at prices significantly lower than what homeowners are able to sell. Why can't the fed mandate that foreclosed homes cannot be sold for less than 90% of current market value? Wouldnt that create a bottom? Homeowners and buyer would then theoretically dictate/have more control of what the "bottom" is from that point forward irrespective of the number of foreclosures on the market. Right now banks are in control of "the bottom" by being able undercut folks who bought homes between 1994 and 1997.
Let's not kid ourselves..... the invisible hand was "slapped" a long time ago. Right now I'm only concerned with stopping the bleeding.
I don’t care that banks will be unable to sell these foreclosed properties.... let them rent them or create rent to own programs with the millions of properties that they'll be stuck with. They started this mess and they are the ones who should be left holding the bag (not bags filled with our money!).

The posts by Ryan and Jaded have just got to be well thought out jokes. I mean, adults just can't be that addicted to the welfare state, can they?

Darwin: The fat cats on Wall Street have enjoyed this welfare state for quite a while now.
Why is equity and fairness considered welfare? One could assert that deducting the interest paid on mortgage is government welfare. We are all guilty of receiving "welfare" in some shape or form. Have you checked out how much "welfare" the agricultural industry receives annually? How about the defense industry?

Why does the issue of "welfare" only come into conversation when on discusses the possibility of removing monies from the coffers of our oligarchy? Oops.... I meant "financial institutions".

The purpose of this credit is to support the housing market. To make it work, fair to everyone and efficiency, I think it shall just credit any house purchase $5,000.00. As long as the house been sold, the market is stable. Why first time? Why second time? It just create mess and unfairness. Also it waste the resource (tax payer's money) of Congress, Senator, President, House... to make simple thing to complicate. It also make IRS job more easy to issue the credit check.

From a CNBC article today:

Given the current buyers market, some investors may find property more attractive, never mind rewarding, than stocks; and for those convinced that the federal government's borrowing-spending binge will bring a nasty bout of inflation down the road, real estate is the hedge for you.

“As inflation occurs the value of your property will go up,” says Todd Huettner, president of Huettner Capital, a Denver-based real estate financing brokerage. “Then there’s the financing. You’re borrowing dollars when they’re cheap today and paying them back when they’re worth less.”

(this guy Todd should try to understand that borrowing $500,000 at a 5% interest rate and borrowing $500,000 at a 20% interest rate are completely different animals. Try buying your home now in an all time price high, global depression inducing,low interest rate enviroment and selling in 10 years or so in a high interest rate enviroment. Does he really think that current buyer won't lose money when he tries to sell? Give me a break!!! These real estate snake oil salesman need to be called out.(not all real estate people are bad but a lot are)

I'm stunned. Jaded, your idea amounts to sticking your fingers in your ears and screaming LA LA LA. Housing prices will move down anyway. When someone sells for 90% of the "market price", that brings down the "market price". All you'd be doing is dragging out the drop to the bottom even more. You really want a bunch of REOs going unoccupied? See what that does to the market price of the house next door. Actually, let's not let any foreclosure sales occur. Then we'll see how bad the market REALLY is.

@ Fairness,

I like your idea of simplicity, but the parameters are to prevent people from merely selling and buying just for an extra $5K.

Jaded,
The rich and poor fat cats have all enjoyed the welfare state. The poor get all the goodies they want (homes, Escalades, plasmas, food, and morbid obesity) that the poor in no other country could even dream of. The rich overleveraged themselves by betting that the poor could pay back their debts. The whole house of cards was ready to fall until Uncle Sugar stepped in to print trillions and keep the party going. The rich are richer, and the poor continue get lured via low rates and taxpayer funded trickery---and now beg for more handouts to continue to buy what they cannot otherwise afford. Where does this maney come from? Why, from your future increased tax payments - or reduced retirement or health benefits.

You are begging to pay the rich fat crooks now, with your future earnings and savings.

The rich want these tax breaks much more than you do 0 and you are biting hook line and sinker

Tim Manni, people won't just sell and buy for the $5,000.00 because the selling cost (commission and closing cost) or the buying cost (closing cost) is much larger than the $5,000.00.

This is the greatest idea yet from Uncle Sam! Let"s see, get me one of them FHA loans at 3.5%, get me a free $8,000 handout and I get a first house with no money out of my pocket. This is great, no real risk on my part. And if things go bad, I'm outta here. Plus I'm helping the economy - right? I mean what could possibly go wrong with this plan?

Well now, even though I don't go for all the handouts, this is part of the multi trillion bail out, and I would rather see it go to the people rather than the fat cat sleeze balls at the financial institutions that caused this all in the first place - who appear to be friends with both parties.
Make it fair accross the board - 8 grand to anyone that wants to buy a home.- we have cleared out a lot of the lower inventory, and by giving it to move up buyers, the 1st timers won't have to be in such bidding wars....as more move up buyers will put their houses on the market, therefore giving the 1st time buyers more inventory to choose from. Geezzzz people, think it through! The 8K will eventually go back in the economy for purchases for their new homes, the inventory/foreclosures will be reduced. Just wish they would have let the banks go under, and given that money to the people from the start.

I'd like to see all those who claim they don't care about the $8000.00 credit for first time buyers or the newer proposal for the current home owners not take the credit when they make their purchase.

Such as Jalena who claims to not care, but is looking for a home. Are you going to claim the credit and take the money?

How many post they think this is rediculous and taking tax money that can be better used are ones who already got the credit?

Funny how people will put down tax credit, but it didn't stop them from taking advantage of it. Better yet, if you don't need the credit - donate it to an orphanage in America or donate the money to something that benefits helping those losing their homes. Find a family who is about to lose their home due to a lost job and give the credit money to them.

Don't just post and complain - do something about it

The sky is falling. $8,000 won't buy a candy bar when we hit massive inflation after houses return to 1979 prices because of the shadow inventory.

Capitalism and government work in collusion to destroy lives.

Buy gold and guns.

i have been in my house since 11/03, but i have refinanced with a different company, which means that my current paperwork will only go back till then, how will they prove the 5 year rule.....maybe through the homeowners insurance?? i think it is great....do something for us vice the banks/ceo getting millions we should get our bailout too. no relief on credit cards, no relief on loans, no relief on taxes, then hell i will take it where i can.

Scotty, it shouldn't matter when you refinanced. Land records will show when you bought the place.

How about me ... I will be in my home 5 years the last week in april!!

Real Estate is a real asset in that it is tangible like gold and oil etc. These types of assets are recognized as inflation hedges because their value rise in an inflationary environment. You can only buy so much gold so real estate is an option to diversify when it makes sense for you.

He states a buyer will lose money buying now and selling in ten years because, he claims, current prices are at all time highs and interest rates will be much higher in ten years.

My comments were how someone could use real estate as an inflation hedge and not if it was a good idea for any particular person. If you are going to own residential real estate, do it with fixed rate loans so your rates do not go higher with inflation. Also, if you had a 5% loan when rates were 20% as in his example, my point was you would take any additional money you would use to pay down the loan and invest it and make more than 5% in CDs so you would not want to pay down your loan with cash.

To his next point, I do think current buyers WILL NOT be losers buying now and selling in 10 years in most cases. Assuming buying a house is right for you, you buy a house you can afford with a fixed rate loan at market rates, and you pay a fair market price for your home, you should come out ahead in 10 years regardless of the inflation rate.

The economic fallacy Paulerson creates is that your home value will decline in an inflationary environment. He has to chose, he can have inflation or falling home prices, both can’t exist in the long run. He also ignores what else occurs in an inflationary environment.

In an inflationary environment, the price of real assets like real estate rise, so your home will be worth more when you sell it. Incomes and rent rates also rise so you should be making more and renting if you do not buy would cost you more.

So if you buy now, your mortgage payment stays the same while the value of your home and your income rise. If you were a renter, then your cost of housing would go up and you would not have the benefit of the appreciation in your home.

There are many snake oil salesman out there, but ignorance is just as harmful.

Respectfully,

Todd Huettner

We sold in 2007 for job opportunity and have been renting ever since. We're ready to jump back in and invest all the money that's sitting in money market making 1.5%. But, we only lived in last house 4 years, so this proposal is worst case scenario for us. We don't get credit, so the people who lived in their house the arbitrary 5 years get the credit, AND they run up the prices in the move up market for us. We're absolutely ready to spend hundreds of thousands of dollars on a house and furnishings, but will wait until this credit expires, denying the economy the stimulative effect of our investment. Seems unfair and arbitrary to us.

Can someone clarify...
I am a first time home buyer who purchased a home in September 2009. Did not qualify for the credit to do income level. Would I qualify under the extension and expansion or is that only for purchases made after Dec 1?

Looks like the bill is closer to passage today and could be in place by next week.
Any idea where I can find the exact language of the bill?
I'm excited about the existing home buyer credit as I've been in my current home for 6 years and was planning on buying a new house this month or next month. However If this doesn't take effect for existing homebuyers until Dec 1 I may need to change plans.

MichaelP, I'll be posting on this subject early tomorrow morning.

OK, here's my situation. I lived in my Baltimore house for 12 years. Just sold it in July. I re-located to Ohio and am renting. I'm about to bid on a new home. So, I lived in my home for more than 5 years, but I'm temporarily renting now. Do I qualify?

I sure hope so!

I bought my house in 2007.
Am I still eligible for home buyer credit?

My wife and I own a home in Florida, since Dec 2006. I (alone) financed a home in Illinois in August of 2009. Our combined income is below the threshold. Would we be able to take advantage of this new extension about the $6,500.00 tax credit due to this second home purchase?

SSK, mang and Greg H., if you look at my most recent post, you'll see more details about what the Senate passed. As I understand it, none of you would qualify. You have to have lived in the home for five consecutive years of the last eight AND be purchasing the new home after the measure is enacted.

My wife and I sold our previous home on 9/10/09. We had owned that home for 9 years. We have been living in an extended stay hotel ever since, while we are looking for our next home. We expect to purchase our next home before the end of this year. We meet the income requirements of this bill. So will we be eligible for this $6500 tax credit even though we have already sold our previous home about 2 months ago?

Mark, it doesn't seem as if you would be eligible. Here's the text of the Senate bill: "In the case of an individual (and, if married, such individual's spouse) who has owned and used the same residence as such individual's principal residence for any 5-consecutive-year period during the 8-year period ending on the date of the purchase of a subsequent principal residence, such individual shall be [eligible for the credit] with respect to the purchase of such subsequent residence." (Emphasis mine.)

Don't take my word for it, though. Check with a tax expert or wait for the IRS to weigh in.

OK, here's my situation. I lived in my Baltimore house for 12 years. Just sold it in July. I re-located to Ohio and am renting. I'm about to bid on a new home. So, I lived in my home for more than 5 years, but I'm temporarily renting now. Do I qualify?

I sure hope so!

Don't take my word for it, but I don't think so, SSK. See my answer to Mark immediately above your question.

If anyone has information to the contrary, please do chime in.

The house (re)defines a first time homebuyer as someone who has not purchased a home in the last three years. And a homeowner as someone who has owned their home for five years.

So the house says:

"Someone who sold their home at the peak of the market for maximum profit, and rented on the beach for the last couple years is a first time homebuyer and is eligible to get an 8,000 paycheck from tax payers if they purchase a new home."

And they also say:

"Someone who bought at the peak of the market and is $100,000.00 or $200,000.00 thousand dollars upside down on the home they purchased three years ago is not a homeowner and not eligible for the homeowner tax credit."

WTF? This is an outrage.

Jamie, I am reading the text of the senate bill and find myself at odds with your response to both Mark and SSK. If the taxpayer sold a home (that they had occupied as a principle residence for 5 years or more) more than 3 years ago, they would be eligible as "first time home buyers". If they sold a home less than 3 years from the time they purchase a new home and they had occupied the home they sold for 5 years or more prior to its sale, then they have owned and used the same residence (the sold home) as a principal residence for a 5-consecutive-year period during the 8-year period ending on the date of the purchase of the new residence, making them eligible for the $6,500 credit. What am I missing? I hope nothing since I am in exactly thet same situation.

Ken, SSK sold in July and is looking to buy. The text of the Senate bill says a person is eligible if they have "owned and used the same residence as such individual's principal residence for any 5-consecutive-year period during the 8-year period ending on the date of the purchase of a subsequent principal residence." It's the "ending on the date of the purchase of a subsequent principal residence" that makes me think you can't have already sold your home -- but hey, it's hardly clear writing. The IRS might see it differently.

I'm hoping we'll all hear more about this soon.

I closed on my loan November 3, with a 3 day period in which I could rescind, with today being the 3rd day. Why do you think December 1 is the date the $6500 goes into effect? The attorney I spoke with this afternoon advised me to rescind then do the paperwork over again next week to delay my closing date. He is under the impression that closing anytime after today makes me eligible. Does anyone have an idea?

Struggling Single Mom

Cheryl, the IRS said today that the eligibility date for purchases begins tomorrow -- Nov. 7. (Link here: http://www.irs.gov/newsroom/article/0,,id=204671,00.html) That's also what the National Association of Realtors is saying.

Everyone, I'll have an update Saturday morning on the main page of this blog, http://www.baltimoresun.com/realestatewonk. Check back then.

I lived in my previous home for 5 years and meet income requirement but I closed on my home on april 2009. That means I'm not eligible ....that's crazy

I contracted with large home builder to build my home in Jan 2010. Home will be finished late May or early June 2010 and close w/c.o. by mid June. Builder insists I qualify, my accountant isn't so sure, he says that because home will not be occupied by 4-30-2010 it doesn't qualify. Where do I stand?

Glenn, I think your builder is right. The April 30 deadline is for signing a contract. You have until June 30 to occupy the property.

Any chance they will dust off this tax credit and use it again. It seems that the real estate market is already slowing back down.

Edwin, it doesn't look like it. But I can't begin to predict what Congress will do!

The artificial government stimulus provided a temporary windfall to sellers. Most homes sold for a higher price. Until government gets out of the market place and stops distorting supply/demand we will continue to have uncertainty

Bring on another tax credit! Seems to be very helpful for home buyers to live the American Dream. Paul B. I like your thinking : ) will the uncertainty ever end?? Seattle is ready!!

We are certainly feeling the affects of the tax credit going away here in Tucson. However, as Paul B. said...

"The artificial government stimulus provided a temporary windfall to sellers. Most homes sold for a higher price."

Someone always pays, in this case buyers were just financing the "credit". If the job market continues to suffer and these people that needed assistance to buy a home lose their jobs...get ready to start adding to the foreclosure list.

I think it's clear that the tax credit and the extension did help the housing market. That little bit of extra incentive I think was just enough to get many buyers off the fence and make the decision to buy.

However, I don't think another tax credit would be a good idea at this point. I think one of the reasons for it's effectiveness was that fact that it had a deadline and would end. If we continue to offer these incentives, home buyers will begin to expect them and they will lose much of their effectiveness in getting people to act.

My client have been finding it hard to even get their tax credit. They're being put through the ringer by everyone, the banks, the government, when does it stop?

In Singapore, first-time home buyers of HDB flat are given grant of between $15k to $40k to help them own their first home. It tends to bring about a sense of belonging and ownership on the future of our country.

I was wondering if the government had and plans to prop up the real estate market again, because here in st. Louis we are starting to see alot more million dollar plus homes being foreclosed on.

Unfortunately the tax credit only worked very very temporarily. If you look at the chart, there was a big spike during the time of the credit, but now the chart has corrected itself to the trend we were on before the credit. Obviously the government cannot afford to keep giving out tax dollars it doesn't have to do another tax credit or to make it permanent unless they do something that will actually improve the economy and get us out of this mess - like cutting taxes and spending. Lenders are not going to be more liberal with their lending practices in an environment like this because there is simply too much uncertainty. Even Mr. Soros who had $25B in the markets is now down to $5B. Too much uncertainty. People are not going to buy.

I know a lot of real estate investors will be happy to hear about this one. A trick a lot of us are using these days is to buy cheap properties and sell them for a low down payment to first-time homeowners with the stipulation that the tax credit be forwarded to us come tax time.
So for a down payment of say $1000, we can get paid a huge percentage of our investment within a year (assuming we paid a low enough price for the property...)
Or we use the tax credit as a selling point, i.e the buyer will get several thousand and will have only put down a fraction... so they sort of get paid to buy a house.

Will be SAD if/when that's no longer an option...

A tax credit however will not fix the cause of this problems. Wouldn't it make for sense for the government to take some steps against banks to sell distressed/foreclosed properties at prices significantly lower than what homeowners are able to sell.

@ Jim - we use that technique to offload low-end tax sale property as well, as well as picking up really cheap properties from the banks with cash and flipping them like you do (and selling the note for cash).
Even without the tax credit, I have a feeling those in our field will be doing fine for quite some time...

Many inexperienced real estate buyers (and customers in any industry, for that matter) make the mistake of assuming that if they pay someone to do a service for them, that person will be looking out for the customer’s interests. Clearly, not everyone is a die-hard altruist, and the vast majority of real estate professionals and agents are primarily interested in padding their own bank account as much as possible. Is it illegal? Certainly no. Is it unethical? Well, maybe. But that’s capitalism, and if you want to jump into an industry where profits are made and lost based simply on who pushes hardest for what, then you had better be prepared to look out for your own interests.

That doesn’t mean you have to go through this process alone, and in fact if you are a relatively inexperienced buyer, then you absolutely need the assistance of a licensed and experienced professional. The most common critical error made by buyers is to hire the same agent that the seller is using (this seems like it might be a huge coincidence, but in fact in most cases it is just a matter of a buyer’s calling the agent who’s number appears on the property listing). This is a huge mistake. The seller’s agents has a fiduciary responsibility to the seller—which means his number one goal is to protect the interests of the seller and get as much money for the home as possible (clearly in conflict with your own interests).

The Federal Trade Commission did a study in 1983 revealing that many buyers (73% of whom felt their interests were being well preserved by their agent) were actually using sellers’ agents, and getting fleeced on prices. Within a few years, most states began to impose Agency Disclosures, which require an agent to disclose for whom he is principally working—but only when asked directly. No mater what, always take the time to ask whether or not your agent is working for the seller (it may only cost you 5 seconds, but it could save you thousands). Never call the agent on the property listing—there is no shortage of other qualified agents out there, why subject yourself to one working for the seller?

"Wouldn't it make for sense for the government to take some steps against banks to sell distressed/foreclosed properties at prices significantly lower than what homeowners are able to sell."

The problem is banks have about 9 years worth of inventory, not counting the properties that are currently in default. Looks like banks should polish up on their property management skills.