Tax credit extension debate

[30ashopper]

OCTOBER 24, 2009, WSJ
By CONOR DOUGHERTY and JOHN D. MCKINNON

Sales of existing homes surged 9.4% in September to a seasonally adjusted annual rate of 5.57 million units, as lower prices and the looming expiration of a federal tax credit lured more buyers into the market.

Amid alleged fraud and administrative problems in the first-time homebuyers tax-credit program, the News Hub panel discusses whether it should be extended.

The data, released Friday by the National Association of Realtors, portrayed a housing market that continues to stabilize across the country and gives ammunition to those trying to extend the $8,000 tax credit for first-time home buyers.

Prospects for extending the credit remain mixed. On Capitol Hill, there are deep concerns about the program's cost. While many lawmakers support some form of extension, they want the credit's substantial cost to be offset by tax increases or spending cuts.

Extending the current credit would cost about $1 billion a month, according to congressional estimates. Some lawmakers are backing an expanded credit that would last through June and cost about $16.7 billion.

Senate Majority Leader Harry Reid of Nevada has been trying to reach an agreement for a 13-month extension that would provide up to the full $8,000 for four months, and gradually reduce the credit's value over the remainder of 2010.

Aides say Mr. Reid aims to have a vote on the measure as part of next week's debate over extending federal unemployment insurance benefits. The package also is likely to include bigger tax refunds for businesses that have suffered operating losses during the downturn.

The new sales data could help backers of the credit, scheduled to expire Nov. 30. But the improvement also could undercut a key argument of backers -- that the recovery remains fragile enough to require an extension. It also doesn't alleviate concerns the credit has been subject to widespread abuse, as the Internal Revenue Service pursues more than 100,000 suspected improper claims.

Existing homes sales were up across the country, the NAR reported. The median price of an existing home has fallen 8.5% year-over-year, but prices have stabilized from their free-fall during the worst months of the recession.

The spike in demand reduced housing inventories to a two-year low. Housing inventory was down 7.5% to 3.63 million homes in September, reducing the nation's housing supply to 7.8 months from 9.3 months in August, assuming the current sales pace.

The housing market is still in rough shape: The supply of homes is still about three months bigger than normal, and distressed sales, such as foreclosure auctions, continue to drag down prices. But many analysts say the broad rebound in sales shows the market is being driven by more than first-time buyers lured by the tax credit.

Sam Khater, senior economist for First American CoreLogic Inc., said sales would likely decline only marginally if the tax credit were allowed to expire. He argued that other programs of the Federal Reserve and Federal Housing Administration have played a larger role in luring buyers.

Interesting news. Generally, it looks like some form of extension is likely.

 

[gmarc]

lol its time for this country to stop spending trillions they don't have and let the mkt fall were it must fall. what good are all these credits doing? prices are still falling. all these credits from housing to cash for clunkers is just taking forward sales away that would probably be sales anyway. in the net 12-24 months interest rates will be sustantially higher as our national debt service will be so great much higher rates will be needed to attract the extra capital needed. our gov't has basically sold the countrys future to enrich the goldman sachs and banks of the world who in turn are giving out billions of bonusus as we struggle with 10% unemployment.

 

[scooterbug44]

I really think that extending this program is a bad idea - especially since there are at least 100,000 cases of fraud already!

 

[Lynnie]

I agree. No more gov't intervention and stimulus.

 

[30ashopper]

Looks like the extension will be extended, and expanded to include existing home owners.

First-time homebuyers have been getting tax credits of up to $8,000 since January as part of the economic stimulus package enacted earlier this year. But with the program scheduled to expire at the end of November, the Senate voted Wednesday to extend and expand the tax credit to include many buyers who already own homes. The House could vote on the bill as early as Thursday.

Buyers who have owned their current homes at least five years would be eligible for tax credits of up to $6,500. First-time homebuyers — or anyone who hasn't owned a home in the last three years — would still get up to $8,000. To qualify, buyers in both groups have to sign a purchase agreement by April 30, 2010, and close by June 30.

..

The credit is available for the purchase of principal homes costing $800,000 or less, meaning vacation homes are ineligible. The credit would be phased out for individuals with annual incomes above $125,000 and for joint filers with incomes above $225,000.

Congress giving homebuyers a $6,500 tax break - Yahoo! News

 

[PalmBeach]

New program announced:

Congress set to expand homebuyer tax credit - Yahoo! News

 

[Bob]

the money is to be paid back. what is the harm in helping people?

 

[30ashopper]

the money is to be paid back. what is the harm in helping people?

The original credit was a give away, is the extension something else? I haven't read the actual bill.

 

[Smiling JOe]

My understanding of the current and extended versions of this recently signed bill, are that it is not to be paid back to the gov't. Bob, did you read a different bill?

 

[PalmBeach]

My understanding of the current and extended versions of this recently signed bill, are that it is not to be paid back to the gov't. Bob, did you read a different bill?

I also understood that it was to be paid back but I also think that most people do not know that.