Appraisers' Free Forum

Good News
Senate Democrats announced today plans to extend & expand the Homebuyer Tax Credit (HTC), and it appears the Obama Administration is going to support it (maybe).

Details;

* Plans to extend the HTC through April 30th. The proposal would extend the credit to home purchases under contract by April 30 so long as they close the sale within 60 days.
* The new plan would offer a $6,500 credit for homebuyers who have lived in their prior residence for at least five years (new).
* The income cap would be extended for couples earning up to $225,000 (now stands @ $150,000), and individuals up to $125,000 (now stands @ $75,000) would qualify for the break.
* Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, said he expects the chamber to vote on the tax-credit plan within a week.
* Senate Majority Leader Harry Reid, a Nevada Democrat, said yesterday that there is significant support among both parties for the homebuyers’ tax credit.
* Senate Minority Leader Mitch McConnell, a Kentucky Republican, agreed that most lawmakers support the unemployment and homebuyer measures. “We’re not that far away from an agreement,” he said yesterday.

Bad News
* “The American people should understand this -- and the affected industries -- this is the last extension,” said Senator Johnny Isakson, a Georgia Republican. “Tax credits like this only work by creating the sense of urgency to take advantage of them.”
* Those buying homes worth more than $800,000 wouldn’t be eligible for the credit.
* Lawmakers also said they won’t extend the break beyond the new April 30 deadline.

My Viewpoint
While I'm glad it looks like the tax credit will be extended and expanded, I feel 5 months is not long enough (thank goodness for the 60 day extension for homes under contract by April 30th). The potential problem I see is that the tax credit will be expiring @ about the time the Fed quits buying mortgage backed securities (MBS's). The Fed has cut back from purchasing MBS's from every week to every other week, and they plan to quit purchasing entirely by March. Home interest rates are tied to MBS's & most experts feel the Fed's exit from the bond markets in March will result in increased home interest rates...a month later the tax credit will expire...let's hope demand has picked up in 5 months.

Interesting to see the disparity between the increased income cap between singles & married couples compared to currently.

http://www.bloomberg.com/apps/news?pid= ... S36Cg5hu5w

I don't see any good news in this at all. What they are doing, if they extend it, is simply borrowing against future market activity and conditioning people in the market to expect freebies.

Steve Owen wrote:I don't see any good news in this at all. What they are doing, if they extend it, is simply borrowing against future market activity and conditioning people in the market to expect freebies.

To your 1st point - Senate Democrats say it won't add to the deficit as they plan to offset the expense by delaying tax breaks to multinational companies.

To your 2nd point (and 1st somewhat as well) - Remember, Isakson (R) Georgia says, "The American people should understand this -- and the affected industries -- this is the last extension,” said Senator Johnny Isakson, a Georgia Republican. “Tax credits like this only work by creating the sense of urgency to take advantage of them.”

Therefore, I don't see that extending & expanding the HTC is "conditioning people to expect freebies," rather it's creating a temporary sense of urgency during these critical times.

The fact they're only planning on extending it 5 months (with an additonal 2 months presuming purchasers can close w/in 60 days of the expiration) shows Senators & Congresspeople are expecting market conditions to stabalize & improve sometime in 2010 (probably by 3rd quarter).

The most critical component is that the Fed doesn't make a policy blunder that would derail recovery (a very real possiblity given this administration). I think the fact they're planning on sunsetting the HTC about the same time the Fed exits purchasing MBS's shows a great deal of confidence on their part (maybe too much confidence).

We won't have to wait long to find out how things turn out. Better buckle your seatbelt.

The only people I see benefiting are builders, developers and listing agents who specialize in small tract homes.

Senior Jefe wrote:The only people I see benefiting are builders, developers and listing agents who specialize in small tract homes.

Yeah...homebuyers, selling agents, appraisers, home inspectors, lenders, laborers, landscapers, tradesmen, cities, counties, states, manufacturers of housing products, hardware stores, shippers, real estate attornies, and on, and on, and on,...............don't stand to "benefit" at all.

"Homebuyers who have lived in their prior residences for at least five years may receive a credit of $6,500"...

Someone clarify what they think this means with an example, please. The phrase "prior residences" is confusing to me. Where do these people live "currently" and how does that fit into the equation?

BRCJR wrote:"Homebuyers who have lived in their prior residences for at least five years may receive a credit of $6,500"...

Someone clarify what they think this means with an example, please. The phrase "prior residences" is confusing to me. Where do these people live "currently" and how does that fit into the equation?

That's a good question and we'll have to wait for them to pass the Bill to be sure. It's my understanding the Senate is voting on the Bill Monday

However, I read it to be; if you currently have a home you've lived in for @ least 5 years & you're thinking of buying up...you'd qualify for a $6,500 tax credit (so long as the other criteria are met).

The current tax credit is for those who haven't owned a "primary" residence in the last 3 years.

Therefore, if I'm correct, those who haven't owned a home in the past 2 years - 364 days would be ineligible for any tax credit. This is because the "first time homebuyer tax credit will probably be extended. A "first time homebuyer" has been defined as someone who hasn't owned a "primary residence" in the past 3 years. A vacation home or rental property are NOT considered a "primary residence.

I think I have it right.