Congress Extends Buyer Credit Through April
Both credits will apply to valid contracts signed by April 30, 2010 and closed by July 1.
The move-up credit does not begin until Dec. 1, so anyone buying a house in November will actually have an incentive to wait until 12/1.
But the impact of the extension of the first time buyer credit is likely to be muted.
Economists at Goldman Sachs estimate that an incremental 200,000 sales occurred between February and November of 2009 because of the credit. Since the credit was due to expire, most of the would-be buyers would have tried to get their purchases completed by the deadline.
How many renters will now decide to buy because they have until next April, assuming the credit isn't extended again? The simple extension "should result in fewer incremental first time purchases than the first round of the credit did," writes Goldman economist Alec Phillips.
It seems unlikely that more than another 100,000 potential buyers will come out of the woodwork now and buy because the credit has been extended for a five months, and it could be even less than that.
On the "trading up" side, Goldman Sachs estimates as many as 70 percent of owners will be eligible. But the $6,500 credit would amount to just two percent of the purchase price of a $325,000 home.
While the extension of this credit may do wonders for consumer confidence and the stock prices of home builders like Toll Brothers and Lennar, the impact will most likely be modest.
At least one would-be buyer said that the tax credit's extension will only moderately increase the likelihood that she will buy next spring.
Maureen Pratt, an Old Town Alexandria resident, had decided there wouldn't be enough time for her to take advantage of the credit this fall, so the extension may make her reconsider.
"An extension would definitely make me look more closely at real estate, but, for the D.C. area, it's hard to see any 'cooling effect' in housing prices as compared to other parts of the country," says Pratt. "Also, it seems like rent is now down so that is a factor for me."
Pratt said that friends in other housing markets such as Phoenix are more enthusiastic about buying since prices have fallen so dramatically.
Even the bills sponsor, Sen. Johnny Isakson, says this is probably it for home buyer credits.
While the bill was unopposed, Sen. Kit Bond, R-Mo., questioned it's efficiency: "[F]or the small minority of buyers whose decision was directly caused by the credit, this raises the question of whether we are subsidizing buyers who may not have been able to afford buying a home in the first place."
HOMEBUYER TAX CREDIT: REVISED NOVEMEBER 2009
FEATURE | Jan 1 – February 2009 | December 1 – November 2009 |
First-time Buyer: Amount of Credit | $8000 ($4000 married filing separate) | $8000 ($4000 married filing separate) |
First-time Buyer: Definition for Eligibility | May not have had an interest in a principal residence for 3 years prior to purchase | Same |
Current Homeowner: Amount of Credit | No Provision | $6500 ($3250 married filing separate) |
Effective Date: Current Owner | No Provision | Date of Enactment |
Current Homeowner: Definition for Eligibility | No Provision | Must have used the home sold or being sold as a principal residence consecutively for 5 of the previous 8 years |
Termination of Credit | Purchases after (Becomes | Purchases after |
Binding Contract Rule | None | So long as a written binding contract to purchase is in effect on |
Income Limits (Note:Increased income limits are effective as of date of enactment of bill) | $75,000 – single $150,000 – married Additional $20,000 phase out | $125,000 – single $225,000 – married Additional $20,000 phase out |
Limitation on Cost of Purchased Home | None | $800,000 Effective Date of Enactment |
Purchase by a Dependent | No Provision | Ineligible Effective Date of Enactment |
Anti-fraud Rule | None | Purchaser must attach documentation of purchase to tax return |
