Well, a news report this morning said Treasury Secretary Tim Geithner and HUD Secretary Shaun Donovan recommend that Congress vote to extend the tax credit for first-time homebuyers beyond the current November 30, 2009 expiration date. Reports over the past several days of fraudulently claimed (and paid!) credits (http://activerain.com/blogsview/1304260/tax-fraud-surprised-) will make some legislators reluctant, but most observers seem to expect something to pass soon.
There are at least two proposals:
- The latest, and the one that I believe Geithner and Donovan support, would extend the 10% credit(up to $8,000) for people who have not owned a home within the past three years, and offer a new tax credit of up to $6,500 to buyers who are moving from homes that they have occupied as their primary residence for at least 5 of the last 8 years. Both would be available through April, with a grace period for homes under contract by April 30, 2010 that close by July 31, 2010.
- A couple of weeks ago there was another proposal to extend the 10% first-time homebuyer credit for a full year, but to reduce it gradually -- $8,000 for three months, $6,000 for the next three, $4,000, $2,000, to zero at the end of a year.
Being in a relatively healthy real estate market, my perspective is undoubtedly different than if I worked where home values are still down 25% or more from their peak. That said, though, I prefer the second of the proposals described above. It would moderate the "cash for clunkers" problem -- strong sales one month, then none the next.
This year we have been moving toward a demand "cliff" at the end of November. The first proposal above just moves that cliff out several months. Markets respond more favorably predictable conditions. The second proposal, or something like it, provide that, and allow buyers and sellers to make informed decisions over a long period of time.
I previously blogged about why home purchases should continue even if there is no tax credit extension. (http://activerain.com/blogsview/1310151/time-to-buy-now-) Time will tell whether a new, extended and/or expanded tax credit is available, but I am advising my clients to keep shopping for the reasons discussed there.