I Ran across some news today on the extension and expansion of the homebuyer tax credit and wanted to share it as soon as I found out.
It seems that the cost to continue the homebuyer tax credit incentive is definitely on the forefront of many lawmaker’s and analysts minds as public opinion continues to challenge the spending habits of the administration’s economic recovery strategy.
There are quite a few new opinions and insights introduced in this article published by the Wall Street Journal today.
Here is an excerpt that summarizes some of the debate that is going on about the upcoming November 30th expiration of the homebuyer tax credit:
A number of House Democrats, however, are expressing reservations about a big extension or expansion of the credit, particularly one that isn’t offset with tax increases or spending cuts.
House Majority Leader Steny Hoyer (D., Md.) favors only a one-month extension for now, said his spokeswoman, and wants Congress to offset any new cost.
“I don’t think there’s a majority in Congress ready to sign onto a very large unpaid-for extension or expansion,” said Rep. Earl Pomeroy (D., N.D.), an influential member of the House Ways and Means Committee.
Some more-liberal Democrats, meanwhile, worry about expanding the credit beyond first-time home buyers. Ways and Means Chairman Charles Rangel (D., N.Y.), for instance, says he favors extending it but doesn’t see the need to expand it.
As a result of the concerns, “I’m not as optimistic about expansion as I am about extension, but I certainly haven’t given up on it either,” said Jerry Howard, president of the National Association of Home Builders.
There is also this mention of some of the expansion discussions around the tax credit:
Leading proponents of the credit would like to extend it at least to next summer, and make it available to all home buyers. They also want to raise the income limits to $150,000 for an individual or $300,000 for a couple. That would cost about $16.7 billion. Currently, the credit phases out for individuals earning more than $75,000 and married couples earning more than $150,000.
Many economists and analysts are concluding that the majority of homebuyers that took advantage of the tax credit would have bought anyway.
Ted Gayer, a scholar at the liberal Brookings Institution, argued in a recent paper that the credit costs the government about $43,000 for each additional home sale it produces. That is because most of the two million or so home buyers expected to claim the credit would have bought a house anyway. Only about 350,000 were additional buyers.
Expanding the credit to make all home buyers potentially eligible would swell the government’s cost per additional home sale to more than $250,000, said Mr. Gayer, co-director of economic studies at Brookings.
This discussion is also addressed is this hard hitting discussion against extending the Homebuyer tax credit in an article by Time Magazine a couple of weeks ago.
But this tax break probably isn’t good policy, especially now that we seem to have left the darkest part of the housing-market woods. Here are the numbers.
The IRS says 1.4 million first-time buyers have benefited from the credit so far; the National Association of Realtors thinks that figure will hit 1.8 million before the end of November. Meanwhile, a number of groups have estimated how many of those people wouldn’t have bought houses had it not been for the tax break — about 350,000 or 400,000.
In other words, some 80% of buyers would have bought anyway. In many markets, prices have fallen so far that houses are affordable in a way they haven’t been in years — that’s a reason to buy even without a gift from the government. We’re giving up tax revenue on $11 billion that we don’t need to.
So there you go….the news we are getting does not seem to be leaning toward any great favors for home buyers. As the clock continues to tick on the current tax credit we still do not have anything definite and what we do have is not good news for those looking for a little incentive to buy a new home in the next year.
As always, I’ll keep my ear to the trail and let you know what I know when I know it!
This article
Other articles about this topic that might interest you:
- UPDATE: $8,000 Homebuyer Tax Credit Extension – October, 2009 We still don’t have anything concrete on the progress of H.R 2801 which looks to extend the $8,000 homebuyer tax...
- UPDATE: Homebuyer Tax Credit, Unemployment Bill Advances in Senate So far, I’m not eating any crow. There have been no reports about changes to the Homebuyer Tax Credit, it...
- Will Congress Extend the First Time Homebuyer Tax Credit? This is the headline today on a Wall Street Journal Article discussing the possibilities of extending and possibly even increasing...
Chris "Doc" Apodaca
Jeff Brown – BawldGuy
Scott Schang
