What’s Happening with the $8,000 homebuyer credit?

Post Updated based on Info available as of 11/5/09 – No significant changes, but a few minor ones, so if you first read this back when I wrote it on 10/29/2009, take another look at the updates.

$8,000There are a lot of rumors flying around suggesting that the $8,000 credit has been extended. While that is not the case, as nothing has been signed yet, there seems to be strong support for:

1) Extending the $8,000 credit for 1st time buyers, including people who have not owned a home for 3 years

2) An added $6,500 credit for move up buyers who have owned their current home for at least 5 consecutive years of the last 8 years. (this provision is still under heated discussion and most subject to compromise before the bill is passed.) Updated 11/5/08

3) Expansion of the income requirement to $125,000 for an individual and $250,000  $225,000 for a married couple.

4) Extension to contracts entered into by April 30, 2010 that are also closed by June 30, 2010 (before July 1, 2010)

The most credible “rumor”/story going around [IMO] is CNN Money’s “$8,000 Credit Still in Play“.

In my opinion #1 and #4 make the most sense in that it seems senseless to drop the credit at the end of “Spring Bump” vs. just before 2010 “Spring Bump”.  Closing the door on the credit on Nov. 30th never made any sense, as seasonal factors will make it appear that the credit going away is having more of an adverse affect than it really is, given November through February sales are almost always lower as to price and volume.

Cutting the cord on the credit at the end of April (end of March even better) makes perfect sense, and gives the market the opportunity to compensate during its most robust season.  If the market can transition from 1st quarter 2010 with a credit, to 2nd and 3rd quarters without a credit on a flat market basis, it will be easier to get rid of it altogether. And yes…eventually…it really must go away. I certainly hope the industry isn’t going to keep lobbying indefinitely for its continuation. That would NOT be a good thing.

While it seems that “Senator’s Have Agreed” this credit is still not signed sealed and delivered, (Update 11/5/09 at last step, needs to be signed by the President) so stay tuned for the final version as I think the wheel may still be spinning with regard to the $6,500 move up buyer credit, as well as the expansion of the  income requirements.

24 thoughts on “What’s Happening with the $8,000 homebuyer credit?

  1. I just heard on King 5 news “it has now been extended to April 30th”. I think that is another one of those “rumors” I mention in the post, and it is not yet signed…unless it has been signed in the last hour 😉

  2. Earlier today on my blog, I laid into the people who were “reporting” the tax credit extension/expansion was a done deal. How utterly irresponsible.

    I was kind of fond on Reid’s “step down” proposal that gradually phased out the credit over 2010. It would have been a lot harder to push for an extension when the credit was stepped down to $2K.

    If the current incarnation of the extension ends April 30, I’ll bet ya a tax credit check people (including the NAR and local / state associations) start whining for an extension in February….

  3. Hi Jay,

    While I agree that there will be lots of “pounding of chests and gnashing of teeth” by the NAR lobbyists if they quit cold turkey, I am not in favor of stepping it down. That would only work to appease the private interests, and do nothing to induce home buyers. In other words it would be throwing money away just to keep the lobbyists quiet. Not a good think IMO.

    God forbid someone would be induced to buy for a $2,000 credit…so, it would be useless and a waste of money.

  4. Good point ARDELL. I was looking at it only as an effective way to stop the “it needs to be extended, again, whining”.

    “… rumors I mention in the post, and it is not yet signed…unless it has been signed in the last hour.”

    I can assure you it hasn’t been voted on in the Senate, voted on in the House, and signed by the President in the last hour. And until ALL that happens, it’s not a done deal…

  5. Jay,

    I didn’t think so. You’d think the news media would get it righter than you and I. Sad really.

    As to the rest of your comment, I know where you are coming from but I trust the President to not spend a bunch of money just to stop a bunch of special interests who are “whining”…though agreed, whine they will.

  6. Glad to hear it, Jerry. If that second leg $6,500 goes through for move up buyers, it will at least help the $400,000 to $800,000 market.

    …rooting for the Phillies right now…on twitter 🙂

  7. It’s a terrible public policy to run up deficit to prop up home prices in an effort to extend and pretend the bank balance sheets. But, I’m not a real estate agent making commissions off increased market activity that it may create, so maybe I look at it differently than you guys …

  8. PG,

    Do you really think the politics of this credit are all about RE agents and commissions? I know you better than that, you are clearly smarter than that. …and you know me a lot better than to think I draw any lines at self-interest.

    There are times when the government has to prop things up a bit. 9/11 was one of them and the market hitting 6,500 was another.

    If you read my rationale for stopping before Spring Bump vs Nov. 30, I think it is clear that my opinion comes from a broader outlook than personal interest. If it was about personal interest, I wouldn’t want it to ever stop. But to stop it in the middle of the 4th quarter is just dumb.

    We all know the deficit is going up before and after this credit…at least I get to see some real happy people benefitting for a change. From where I was standing this year, it was a beautiful thing. Young families being able to buy houses at $150,000 less AND use the $8,000 credit to get a new roof…it’s been a good year and NOT because of my personal interest reasons.

  9. Ardell,

    I apologize for the “commissions” snark to you on a personal level, but not as a general statement about the freaking NAR that continues to wreak its havoc on this country. The so-called 1st time home buyers credit never should have been started to begin with, and should stop now. Period. End of story. There is no justification for continuing dumb goverment policy just because it’s in the middle of Q4.

    What got us to this point culturally that we have this overwhelming need to continue feeding the credit and entitlement beast to get people to pay too much for housing? Yes, we prop up all manner of prices (food and milk come to mind). Cash for clunkers was every bit as dumbass. But, I guess everybody works the government system to their own ends.

    If you want to help “young families” put and keep a roof over their heads, immediately drop the artifical price supports, and let houses get cheaper. Encourage them to save at least a modest down payment as evidence that they can afford what they are buying in the fist place. All you’ve accomplished by “giving” them $8K is make the price tag of the house at least $8K more expensive and, worse, encouraged them to buy something they otherwise cannot afford, did not have the discipline to save for, etc. Stop the mortgage interest deduction for the same reason. It’s sad that our populace is so thick that they cannot see how mortage interest deductions, tax credits, and the like do them more harm than good.

    I see this whole thing as a transparent effort to extend and pretend bank balance sheets. Whether dragging feet on foreclosures, handing out money to bribe people to overpay to keep prices propped up. Watever works. Anything to slow down the asset value deflation that was (and remains in great part) so out of whack. I’m surprised the NAR isn’t pusing for zero-down, neg-am “pick your payment” loans in order to “stimulate” the housing market.

  10. PG,

    I’m not going to defend NAR, who I believe is so off track at this point there’s no fixing it. There’s really no arguing whether this Administration has done well, the stock market hovering around 10,000 is proof enough, though to my taste I’d rather see it hovering around 9,000 indefinitely. But getting it out of the spriral at 6,500 IS something I would expect elected officials to deal with. The credit is not about helping buyers as much as it is about helping owners (including the neighbors of abandoned homes). Life, Liberty and the Joys of Home Ownership are what the USA has been about for a very long time, and I have no interest in changing that.

    Arguing whether or not there should ever have been a credit in the first place is like pulling everyone out of Iraq in one day because we should never have been there. Once we are waist deep in it, we have no choice but to pull out best we can, and best we can is not at the beginning of the 4th quarter, it is at the end of the first quarter. The only reason they are giving a long timeframe from contract to close is so that short sales and bank owned homes won’t be passed by at the end of the day. That is what was happening with this credit, and correcting that makes good sense.

    Contracts to the End of February or March and close by June 30 would have made the most sense, but hey…close enough.

    What I see are houses that were owned by people who couldn’t afford to maintain them during the loose loan period, or builders who ran out of money when they were 95% complete, that need more than the Average Joe buying a house normally has to deal with.

    The tax credit is compensating for that market weakness…not for current buyer weaknesses. It’s cleaning up the distressed homes, it’s putting appliances back that were pulled out, it’s fixing roofs that previous owners could not repair or replace. Or…worst case…it’s making sure current owners have the resources to fix and maintain over time.

    When I became a Realtor in 1990 (not one at present) we pledged to support the value and integrity of the land and all that came with. Until you are sitting in Florida as one of the only occupied homes with alligators running in and out of the pools of the abandoned properties, you will not see this issue clearly. Envision that. Envision your children not being able to leave the house because all of the green pools in the neighborhood are attracting snakes and gators. And then tell me the government shouldn’t support getting more people into vacant property. Perhaps the credit should only go to those who are buying abandoned homes created by the mortgage crisis, but to say everyone should just turn a blind eye and let the chips fall where they may…well that just ain’t “The American Way”.

    Speaking of which I need to get my tall boots on to go figure out what 2% or more the builder didn’t finish, with a structural engineer, and walk the lot and see if I can find the builder stakes in the mud. This bank owned taken from the builder needs a family in it, and someone needs to roll up their sleeves and make sure it’s in good shape beyond “the dishwasher works great”.

    Restoring this market is about much more than money, and like most ANY problem…it can’t be done without money.

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