Increase in Tax Credit for First Time Home Buyers?
As I mentioned in a previous post, first time home buyers could receive a tax credit up to $7,500 on first homes purchased between April 9 of this year and June 30 of 2009. There could be more good news in the works! Potential home buyers could receive additional tax and financing incentives within the next few months. It could come from either a post-election lame-duck congressional session or from the newly elected Congress arriving in January.
To encourage activity in the housing market, national housing industry trade groups are pushing federal officials for a new round of emergency economic stimulus legislation to jolt the housing market into action. Though House and Senate leaders have not officially agreed on whether or not to hold a session immediately after the election, advocates would like to see actions to be pursued by the end of December.
The National Association of Home Builders (NAHB) is creating on a plan for a more substantial tax credit for home buyers that could range as high as $12,000. The reason behind the push is fairly clear-cut: The housing and mortgage crisis helped to set off the current financial meltdown, but until the course the real estate market is on is corrected, with the glut of unsold new and existing homes sold, a deeper recession could be in the cards.
The NAHB also wants to make the new tax credit immediately available and able to be spent like cash for a down payment. This could be accomplished through credit-anticipation loans from private lenders that would be repaid by buyers after they get the credit on their next federal income tax return.
The National Association of Realtors has a different proposed package to shake up some activity on the real estate market. One of their plans is to revise the current $7,500 first time buyer tax credit passed this summer by eliminating the requirement that the credit be repaid to the government over a period of years or when the property is sold. Under the Realtors' plan, the credit would stay at the current $7,500 level, but would be expanded so its available to all types of primary residence home buyers, not just first time home buyers. Additionally, it would not have to be paid back.
It has been said that the repayable $7,500 credit has not been sufficient to attract large numbers of buyers into the real estate market. Potential buyers may view the credit more as a loan that they have got to pay back. Even at a zero interest rate, the repayment aspect could be a psychological barrier for some consumers. Getting rid of the repayment feature and allowing all primary residence home buyers to participate would spur significantly higher sales at a relatively modest cost.
Both of the organizations want Congress to extend the original 2008 stimulus bill's high-cost mortgage limits, which are scheduled to expire December 31. In the 13-county Twin Cities metro area, that changed the limit on FHA backed loans from $276,683 to $365,000. For greater
The builders' stimulus proposal also includes support for reinstitution of down-payment assistance programs for certain FHA home buyers that have been deemed controversial in the past. In fact, legislation was passed this year that banned the programs. Through them, sellers basically funded all or parts of their home purchasers' down payments by making charitable contributions to nonprofit organizations. The nonprofits would then take out an administration fee of about $500 or more, and then bestow the money to the buyers. The ban took effect just recently in October.
FHA officials oppose all types of seller-funded down-payment assistance. They argue that they result in disproportionately higher delinquency and foreclosure rates.
Not all housing trade groups support a new emergency stimulus effort aimed at stoking home sales. The National Multi Housing Council says that special tax credits and revived down-payment assistance would just prolong imbalanced housing policies that originally triggered the housing boom abuses.