Will the Home Buyer Tax Credit Be Extended?

The following information has been distributed by the National Association of Realtors and may be of interest to you regarding the latest on the Tax Credit Update. Congress is discussing whether the $8,000 tax credit to first-time home buyers, currently scheduled to expire on November 30, 2009, should be extended or even expanded to include those who are NOT first-time home buyers.

The shape of a final tax credit package has remained in flux since Tuesday. As the media has reported this morning, however, there appears to be an agreement on the details of an expanded and extended credit, but NO VOTE has yet occurred. This is important to note: The extension/expansion has NOT been passed and we do not know for sure that it will. Note also that anti-fraud measures have been added to this bill.

If you are in support of the passage of the tax credit expansion and extension, please write your Senators and Representatives to express your support and forward this article to your friends, family, co-workers, etc.

Following is a brief overview of the proposal in its present state:

The Extended and Expanded Tax Credit agreement includes the following provisions:

1. First-time homebuyers – same definition as current law. Amount: $8,000

2. Repeat purchasers. Must have used previous home as a principal residence for 5 of the 8 previous years. Amount: $6,500

Income Limits: $125,000 for single filers/$225,000 for joint filers. Same for both first-time and repeat/move-up buyers.

Limitation on cost of home purchase: $800,000

Time Frame: December 1, 2009 to April 30, 2010 plus 60 Day extension if binding contract is in place by April 30, 2010.

Please keep this in mind: Housing values have plummeted in virtually every region of the country. Maintaining a healthy, stable real estate market is essential to America’s economic well-being, consumer confidence and creating jobs. Yes, creating jobs!! (Stay tuned for tomorrow’s article on real estate and jobs.)

This legislation, if approved, will have considerably more impact on improving home values than the $8,000 tax credit to first-time home buyers did. By contrast, this legislation would effect a majority of home purchasers instead of a relative few. It would help to recoup equity lost by homeowners who have lived in their homes for 5 years or more and will shore up a sagging “buy up” market.

Here’s an example: Imagine the homeowners who have lived in a home for 6 years. They bought their “starter home” at the peak of real estate values and now have suffered a considerable loss of equity. They may still have some equity though, and today, their family has grown and their darling starter home is bursting at the seams.

The $6,500 tax credit may not recoup all of their lost equity but it might be enough to cover closing costs on the sale of their existing home and (possibly) the closing costs on their new home.

Or, this example: Five years ago, Mr. and Mrs. Baby Boomer were planning to “go condo.” The kids were grown and have families and homes of their own. But the nest egg of real estate equity they had in their family home five years ago had dwindled and they have elected to stay put rather than buy the retirement condo of their dreams. This legislation could have major, positive impact on condominium values.