Many home buyers, especially first time buyers, have benefitted from significant tax credits in the last two years. Designed to help stimulate the housing market by offering tax incentives to home buyers, the credits have generally seemed to accomplish their intent. Home sales have improved for months, and most recently, reports on foreclosures suggest the number of people entering foreclosure is dwindling.
The current first time home buyer tax credit program was begun in 2008 with the passing of a credit of $7,500 to be paid by within 15 years. In the midst of record low home sales and drastically falling home prices, the government was pressured by the real estate sector and lobbyists to help new buyers enter the market.
Two subsequent extensions of the credits during 2009 have led to a current $8,000 new home buyer credit that does not have to be repaid, along with an added $6,500 credit for other home buyers.
The December 2009 extension is set to expire on April 30th. Any home purchased by this date that closes by June 30th would be eligible for applicable credits. Unlike the previous to expiration dates, there appears to be less pressure on Congress to extend, and a more general sense that lawmakers feel this is the last go around for the current credit.
The current debate over the tax credits centers on whether the credits induced a sizable portion of home buying since their inception, or whether they simply saved taxpayers money for homes they would have generally purchased anyway.
The National Association of Realtors and others in and around real estate are certainly going to push for more time to help home buyers enter the market. Naturally, industry participants have benefited from the growth in home sales. The challenge is to convince lawmakers that while many other governmental assistance programs designed to help stimulate the economy are ending soon, the housing market is still too unstable to turn loose.
Even with the relative success of the industry since the latter half of 2009, there are still plenty of existing foreclosed homes to offer some leverage to lobbyists. If the tax incentives are turned off too quickly, a reversal of all the work in the last couple years could be for not. This is especially true if the credits have been a major driving force of buying in the near-term, as industry reps argue.
With Fed lending programs are nearing an end, it may be more difficult for struggling consumers to modify or find new loans. This difficulty, combined with a removal of the tax credits, may make the housing market too expensive for the typical home buyer, some suggest.
The possibility of an extension already seems weak, given than many supporters of the last extension have already vocalized their feeling that the credits are no longer necessary. They feel they have accomplished their intent of jumpstarting housing but that the market is stable enough to turn it loose without assistance programs. This may sound risky to some, but that would likely be true at whatever point the program were ended.
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