Homebuyer Tax Credit Drives Up Sales, but Congress Holds the Cards

Sales on existing homes that closed in May were up 19.2 percent from a year ago, according to the National Association of Realtors. But will that pace continue now that buyers have missed the tax credit? Probably not. Most likely some people who may have bought during the summer months signed contracts by April 30 to take advantage of the tax credit.

Indeed, some of these sales could fall apart if Congress does not extend the time to close homes until Sept. 30 rather than the June 30 deadline now law. Also, Congress needs to extend the National Flood Insurance Program, which has temporarily expired. Homes requiring flood insurance can't go to closing until that program is extended.

"We are witnessing the ongoing effects of the home buyer tax credit, which we'll also see in June real estate closings," Lawrence Yun, NAR's chief economist said in a statement released with the report. "However, approximately 180,000 home buyers who signed a contract in good faith to receive the tax credit may not be able to finalize by the end of June due to delays in the mortgage process, particularly for short sales."

He added that "many potential sales are being delayed by an interruption in the National Flood Insurance Program. Florida and Louisiana, also impacted by the oil spill, have the highest percentage of homes that require flood insurance."