RealEstateEconomyWatch.com Insight and Intelligence on Residential Real Estate
Just six months after Congress came within a whisker of getting a $15,000 tax credit for first-time home buyers, a group of chief executive officers in the real estate, building products and home goods industries are mounting a new effort to expand the credit from its current $8,000 maximum and make it available to all buyers, not just first-timers.
The Housing Working Group of the Business Roundtable, an association of chief executive officers of leading U.S. corporations, today also announced it supports ongoing efforts by the Federal Reserve to keep 30-year fixed mortgage interest rates at historically low levels and do so for the next 12 months, and a comprehensive review of existing foreclosure mitigation and loan-modification programs.
“We recognize the earlier efforts made by the Administration and Congress, but strongly recommend taking additional steps to jumpstart the lagging housing market in order to stimulate a broader economic recovery,” said Richard A. Smith, President and CEO of Realogy Corporation and Chair of Business Roundtable’s Housing Working Group.
“If the housing market is not corrected or stabilized, the tide of the recession is not likely to reverse in the near term, and the slide in the economy overall will continue. We believe targeted, demand-side solutions - such as the ones Business Roundtable is recommending today - will provide a critical next step for a housing recovery that will help create jobs and boost the economy as a whole.”
Early returns on 2008 taxes suggest that last year’s version of tax credit-a version less attractive to buyers-is working. That version requires buyers to repay the credit and its value to taxpayers was capped at $7500 not the current $8000. According to very preliminary figures from the IRS, some 567,685 taxpayers claimed more than $3.9 billion worth of first-time homebuyer credits on their 2008 tax returns. Even though 38,158 of them may be disqualified because the IRS has found they had ownership in a personal residence within the past three years, the total will certainly exceed the $4.6 billion estimated by Congress last year. These preliminary returns suggest means the credit helped to make possible at least ten percent of the roughly 5 million new and existing home sales last year. No doubt it was a deal maker in many of those transactions. The preliminary figures were from returns received by March 6-five weeks before 2008 returns were due. Read more about it at First-timer Tax Credit is Working.
Imagine what a difference a $15,000 credit available to all buyers with the improvements that have since been made would make to the marketplace today. These improvements include no need to repay and the credit can be used to finance closing costs (but not down payments) at the time of sale.
In addition to Smith and John J. Castellani of the Business Roundtable, , the Housing Working Group consists of: Thomas C. Nelson, Chairman, President and CEO of National Gypsum Company; Steve Odland, Chairman and CEO of Office Depot; Daniel S. Fulton, CEO of Weyerhaeuser Company; Jeff M. Fettig, Chairman and CEO of Whirlpool Corporation; Michael H. Thaman, Chairman and CEO of Owens Corning; and Roger Fradin, President and CEO of Honeywell Automation and Control Systems.
How likely is Congress to extend the current $8,000 tax credit or an even better tax credit to 2010?
Hi Justin,
Good question. I would say the odds are better today than two weeks ago, First, the housing lobby is uniting behind it (and that doesnt always happen) and the evidence will continue to roll in confirming that the 2008 credit and the California credit are working. I think the building products and home goods industries will get behind it. Finally, the credit is one of the few elements of the February stimulus that is producing measurable results Even so, it is very hard to pass legislaion like this and it will be much harder if the Administration doesn’t support it.
If this were to happen…
1.Do you think it would cover homes bought in the end of 09 by those who are not first time home buyers?
2. When do you this discussion/debate will happen?
*Please* tell me this would be retroactive. I hate to think I will have taken the hit of having to sell my home at a loss, pay both sides of closing costs while the buyer took their $8,000 first time credit, and now I’m even paying some closing costs on my new home (the city I’m moving into is not so much a “buyer’s market”) and may just miss $15,000?! That would sum up my luck in financial timing.
I am a real estate agent, I thought the government missed the mark when they offered the tax credit to only first time home buyers. I know many current home owners who would be willing to put their home on the market, take a “hit” on selling if they knew there was going to be a tax credit to absorb some of the pain, then realizing the benefit of buying “up” in a down market on their new purchase. That is stimulus!
Not all first time buyers can come up with down payment, job stability or credit to realize the benefit of purchasing a home. No ability to purchase no stimulating the ecomony. Also, most of my first time buyers want to take advangtage of the low interest rates and low payments, the $8000 tax credit is a “bonus” for most, not the reason they decided to purchase a home. Unlike pre-existing home owners who may be losing out on the sale side of a transaction.
I say extend the $8000 tax credit through 2010 with no recoupment and open it up to all home purchasers.
This is bizarre. Housing prices have to, HAVE TO come down. They are too high right now and will eventually correct.
I can’t believe that everyone here wants a “recovery”, meaning that houses go back to the unsustainable bubble levels. I can’t believe that you think the definition of something “working” is when it artificially props up an incorrect price level. Don’t you people realize that home prices disconnecting from reality is what CAUSED this problem in the first place? And now you want to inflate housing back up at any cost? Now you want to just hand money to anyone who buys a home?
I don’t care if handing out free money would stimulate the economy. We don’t need more stimulus in this sector. We need reality-based recovery. And things won’t recover, really recover in the real world, until prices go back to where they were, pre-bubble.
I think that this would be a great idea. I personally decided to buy a house based on the 8000. Haven’t quite gotten there yet, but will soon. I think this would be fantastic.
I am a first home buyer and am using an FHA loan - but have found that my income has phased me out of the $8k credit; the ironic thing, in CT, is that if I didn’t HAVE the income that I currently have, I wouldn’t have qualified for a loan to GET the house.
I hope Congress actually adjusts locally for that $8k credit qualifications. And make it retroactive.
Dan,
Good luck. Be sure to call your Congressman.
Why not give money to people who pay their bills on time? Wow! What a weird idea! People who have good credit and want to buy a home, get a tax break!!! Nonsense! Let them eat cake.
I signed a contract to buy a new construction house in May. The builder will need 4-5 months to build it and the city is notorious for taking a very long time to approve the permits. On average, 2 months is the waiting time. This puts closing on the house into Dec and I will miss the deadline of Nov 30th for the $8000 tax credit. I hope they will extend the tax credit for at lease a couple of months.
Hey JT
That is exactly the situation my wife and I are in. We close on our new house when it gets built… which is on December 9. We missed it by 9 days. I’m hoping they extend the time frame as that tax break would really make things easier for us.
Citizens seem to sometime lose sight of what everything comes down to. The stimulus package does not inflate prices at all, responding to a previous post- what everything always comes down to is supply and demand. It’s that simple. The tax credit encourages buying a home for people who aren’t already in a home, which is genius. This in turn shrinks supply and increases demand. This will help in a small way stabilize the market in a more gentler decline rather than the alternative of dropping an A-bomb on top of it.
Everyone knows by now what happened to the housing market, but what everyone seems to overlook is that prices of real estate were inflated for more than just one reason, and one huge guilty party is the General Contractor’s paired with Sub-Contractor’s building of the general speculative home/condo. You see the housing market was so hot that sub-contractor’s could charge much higher prices than they would have charged pre-bubble, and demand was so high that General Contractor’s for the most part would not dare slow down to actually make subs accountable; it was like a race to see which general contractor’s could build and sell the most homes/condos before it all came falling down. With demand so high they didn’t have to worry about either. The first time I really thought about how big a bubble the US was in was when I saw a General Contractor build a home completely subbed out. He violated several city permit codes in the process, and was forced to tear it apart and re-finish the home. The contractor did so using all sub-contractor’s, again. So he built a brand new home, did a complete remodel of a new dwelling, and still sold the home for over a $15,000 profit. It was that point in 2007 I realized that when people who aren’t accountable are being awarded for their actions in such a staple of the economy- such as the real estate sector; that’s when you start to think, “uh oh the hammer is coming down soon, and hard.” It was only a matter of time before accountability finally took over, it was just surprising to me how long it truly took. The psyche of the general population is truly underestimated also, I personally think that it accounts for more than 50% of a inflation/recession/depression.
That being said now, good solid people have to suffer the consequences of trying to chase the American Dream that has ripped the heart and hope out of so many people. On top of that, all the people that are waiting out the storm are holding out to do -anything- until the clouds clear and let the sun shine through. This doesn’t help anything during the time period of decline, but it does help a bit though on a rebounding stage.
This is just my tidbit.
Hi Justin,
We are moving from the house we have lived in for 33 years. The house we are having built is a bit less that what we sold ours for…but we always can add upgrades! What exactly does “moving up” mean? Does it mean for existing home owners? Does it mean that the house we buy/build has to be more money than we sold our house for?
Also, if this bill is signed to help existing homeowners, would it be retroactive,say,for people who closed the end of November?
If you don’t know the answers to these questions, can you refer me to someone who might have a guess at it?
Thank you!!
Val,
For the prupose of qualifying for the new credit, “move up” biuyer simply means someone who has lived in their current home five out of the preceding eight years. It doesn’t mean that you have to buy a larger or more expensive house. The new house cannot cost more than $800,000, though.
The bill as it is currently written would not help an existing homeowner who closed before the end of November. The credit runs from Dec. 1, 2009 to April 30, 2010, with an additional 60 day period to close escrow.