Expanded home buyer tax credits to become law
The National Association of Realtors says the new provisions -- a longer time frame for the $8,000 first-time buyer credit, higher income limits and a $6,500 credit for certain repeat buyers -- will go into effect as soon as pen hits paper. The trade group has a handy "compare the tax credits" chart that you can find here.
You can also read more about the details on yesterday's tax-credit blog post.
The first-time buyer tax credit, hailed by the real estate industry as a stabilizing force for the battered housing market, has its critics. They say it's a lot of money, much of it going to people who probably would have bought anyway and some of it going to tax cheats (including 19,000 who didn't actually purchase a home). Some of you have said you think it's a stimulus that won't help in the long run.
In this running Wonk poll, I asked you a simple question about the bill: Thumbs up, down or sideways? The voting was overwhelmingly thumbs up at first. But as of last night, the results were split: 49 percent down, 47 percent up and 4 percent sideways.
I chatted yesterday with Heather Fernandez, vice president of marketing with real estate search engine Trulia. She's enthusiastic about the soon-to-be-law, though not without reservations. One reason to cheer, she said, is that consumers pump money into the economy after buying a home ($30,000 within the first six months on items ranging from furniture to hot water heaters, Trulia found in a study last year). She also thinks the credits will help move more foreclosures and cushion prices in the short term.
There's a significant "but," though: "What happens to real estate demand on May 1?" Fernandez asks. April 30 is the last day you can sign a contract and still qualify for the first-time or repeat-buyer tax credits.
"While this may spur tremendous activity in the short term, what's going to stop demand from dropping off a cliff?" she said.
We'll know when we get there. U.S. Senator Johnny Isakson, the Georgia Republican who championed an expanded tax credit (his proposal: $15,000 for every buyer), said in a statement Wednesday that this third version of the tax-credit program is really and truly the last one. "Tax credits like this only work by creating the sense of urgency to take advantage of them," he said.
Fernandez said one thing's for certain: The credit extension and expansion has a lot of people thinking about real estate. When we talked yesterday afternoon, Trulia's traffic was on track to be the best ever for a Thursday. For that to happen in November -- during housing's slow season -- is really something, she noted. Trulia launched in 2005.
I asked you in another recent Wonk poll how the credit would affect you. Here's what you said, as of last night:
26 percent: I'd qualify as a repeat buyer, and I plan to sell my current home and buy another one
20 percent: I'm a taxpayer, that's how it affects me. ARRRGGGGH.
16 percent: I don't qualify as a first-time or repeat buyer, to my frustration
10 percent: I already got a first-time home buyer tax credit
7 percent: I'd qualify as a first-time buyer, and I plan to buy my first home by April 30
5 percent: I'd qualify as a repeat buyer, and I plan to buy but not sell
4 percent: I'd qualify as a first-time or repeat buyer, but I'm not planning to buy soon
4 percent: I work in the real estate industry and hope it'll help business
2 percent: I don't qualify as a first-time or repeat buyer, but I don't mind
And a few of you wrote in your own answers. For instance, "It would make it easier for me to sell my house to a first-time buyer." And: "I'm a repeat; my spouse a first-time. Unsure if we qualify for any credit together."
Married couples can't qualify for the first-time credit unless both of them are first-timers under the rules (which actually define a first-time buyer as someone who hasn't owned a principal residence for the previous three years). But I don't see why a couple that's half repeat-buyer, half first-timer couldn't get the repeat buyer credit as long as they qualify on income. (Let me know if you hear otherwise.)
The IRS answered lots of scenario questions about the first and second versions of the first-time buyer credit. Presumably the agency will do the same for this expanded credit program.