Nationally, home resales are up nearly 24% from the bottom in January, after jumping 9.4% in September, according to NAR (the National Association of Realtors).* There have been reports of buyers hurrying to make a deal as it is “now or never” to take advantage of this incentive. But can this program really take the credit?

The government sponsored First Time Homebuyer’s Tax Credit is set to expire on November 30th of this year.  Home builders and NAR are calling for an extension and/or expansion of the credit.  

Under the current guidelines, the credit phases out for individuals making $75,000 or couple earning $150,000,and there is a movement to extend the credit to at least next summer and raise the income limits to $150,000 per individual and $300,000 per couple. Many feel that the credit has helped the housing market show signs of a rebound.  Inventories have stopped rising, although levels remain high. While some suggest that the looming expiration of the credit in November is moving some home buyers off the fence, others wonder whether the credit has had a significant impact in the market at all, for the following reasons:

• Of the many homebuyers taking advantage of the credit, it is expected that many (some experts estimate as many as 4 out of 5) would have bought a house anyway.
• A Reuters article of Friday 10/23 suggests that “the direction of mortgage rates and general health of the job market will have the broadest, and most profound impact on the housing market” and that a better idea would have been to spend that money on qualifed loan modification counselors to stabilize the market by preventing foreclosures, rather than enticing marginal buyers to enter the market.
• The IRS is investigating a number of “criminal schemes” involving the credit. At a recent hearing, Bonnie Speddy, national director of AARP Tax Aide, a volunteer service for low income people, “suggested that abuse of the home purchase credit appeared to be widespread, in part because of relatively loose standards for claiming the credit (Taxpayers don’t have to file their claims as part of a real estate transaction and instead can file or amend their income tax returns to claim the credit.)

*Sources:

With Government Plan about to Expire, Home Resales Spike, The Journal News, 10/24/09, U.S. First Time Home Buyers: Worth the cost? Reuters 10/23/09, Home-Buyer Credit is Focus of Inquiry, Wall Street Journal 10/20/09, Home Builders’ Confidence Drops, WSJ 10/19/09, Cost Concerns Surface Over Home Buyer Tax Credit, WSJ 10/15/09.

Thank you to Pat MacCarthy for forwarding some of the information on the Home Buyers Tax Credit.

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