For a while now we've been talking about the $8,000 first time homebuyer tax credit that the Obama administration passed as a part of the 2009 Economic Stimulus package. Last week the program was expanded to allow homebuyers to use the tax credit as a down payment on FHA loans.
Now there is buzz in Washington that legislators may try to bump the first time homebuyer credit from $8,000 all the way up to $15,000. From USNews.com:
In an effort to jump-start the ailing housing market, Sen. Johnny Isakson, a Republican from Georgia (and a former real estate professional) has introduced legislation that would beef up the tax credit for first-time home buyers. Under the terms of his bill, which was introduced Wednesday, the size of the credit would expand to a maximum of $15,000 from the previous cap of $8,000, and it could be taken by anyone who buys a primary residence, instead of only by first-time home buyers. The bill would also remove the income limits that had prevented individuals making more than $75,000 a year from claiming the credit, which would be available for a year after the date of the bill's enactment.
The article goes on to talk about how the current tax credits are missing a substantial piece of the market because it's only targeted towards those who are first time homebuyers. The program aims to include others who are important to a housing recovery. So called “move-up buyers'. Sen. Johnnny Isakson continues:
the current tax incentive is insufficient because it misses a second set of buyers who are essential to a housing recovery. “We don't have a recession in first-time home buyers,” a statement from the senator said. “We have a recession in the move-up market.” The legislation aims to convince these “move-up” buyers that, despite falling real estate prices and mounting job losses, now is the time to buy that larger house.
Bringing the move-up buyers back into the market is a key for a housing recovery, says James Gillespie, president and chief executive of Coldwell Banker Real Estate. “There are so many people out there that have had a lifestyle change that has taken place in their families in the last three or four years—whether it is a birth, multiple births, a marriage, a job promotion—and they are either still in their apartment or they are in their starter home or their second home, knowing that they should be moving up,” he says. Given the current market turbulence, many such buyers remain on the sidelines because they are concerned that if they buy a home today, it could decline in value in the future. “A $15,000 tax credit takes that [concern] off the books,” Gillespie says.
The legislation has been introduced, but now faces an uphill battle as it would mean another 35.5 billion dollars in additional government spending. That's not something that a lot of lawmakers want to sign on for right now as a lot of the stimulus spending is now being called into question. Despite that, the bill now has co-sponsors from members of both parties.
As expected all sorts of real estate and mortgage industry associations are coming out in support of the bill. If it passes they expect that it would make quite an impact in improving the real estate market.
$15,000 Tax Credit Provisions
This legislation would be different from the current $8000 tax credit in several respects. Here are the main changes that we would see:
- The bill nearly doubles the first-time buyer tax credit to $15,000. (10% of the purchase price – up to $15,000)
- You wouldn't have to be a first time homebuyer. Anyone, including move-up buyers could take advantage.
- Income requirements would be removed, so anyone, even millionaires, would be able to take advantage of the credit.
- Tax credit would be available for 1 year from the signing of the bill. That means the credit would be available well into 2010.
Is It A Good Idea?
While the $15,000 tax credit would sure be enticing if I was buying a home, or looking for an investment property, I'm not. Because of that I'm up in the air about this. I'm not sure if we need to be spending another 35.5 billion dollars on another giveaway right now. Would the improvements in the real estate market really be worth it? I don't know that they would be.
What are your thoughts on another tax credit for homebuyers? Do you think this is a good idea that will really improve the real estate market? Is it worth another 35.5 billion dollars? Tell us your thoughts in the comments.