Over the last year or so we've had a lot of talk on this site about the homebuyer tax credit. It helped to spur activity in the real estate markets, bringing more first time homebuyers into the market than we've seen for a long time. It also brought in a lot of current homeowners when the credit was extended to include people who already own a home. We watched last month as there was a flurry of activity as the deadline loomed for people to put in a purchase agreement for a house in order to beat the clock. My brother was one of those people who made their home purchase on the last day possible!
Homebuyer Tax Credit Deadline Is Looming
April 30th was the deadline to get a signed sales contract, and buyers still have until June 30th to complete the sale. Problem is a lot of people ended up putting in a signed sales contract for a short sale or foreclosure home, and the process is moving slower than they had hoped. In fact, many of them may not meet the June 30th deadline to complete the sale.
Now there is an ammendment to H.R. 4213, “the American Jobs and Closing Tax Loopholes Act of 2010” bill being considered that would give thousands of homebuyers extra time in order to complete their sale.
Homebuyers may get an extra three months to finish qualifying for federal tax incentives that boosted home sales this spring.
Senate Majority Leader Harry Reid, D-Nev., said Thursday he wants to give buyers until Sept. 30 to complete their purchases and qualify for tax credits of up to $8,000. Under the current terms, buyers had until April 30 to get a signed sales contract and until June 30 to complete the sale.
The proposal would only allow people who already have signed contracts to finish at the later date.
The bill, which is being sponsored by Senate Majority Leader Harry Reid, D-Nev., Sen. Johnny Isakson, R-Ga., and Christopher Dodd, D-Conn., is currently under consideration. The bill wouldn't extend the time available to put in a signed sales contract, which has already expired, but simply extends the time available to complete the sale to September 30th.
Many Sales May Not Complete Without Extension
Realtor groups have been pushing hard for such an extension because they're seeing more and more loans that aren't going to complete on time.
The National Association of Realtors has been pushing hard in Congress for the extension. Mortgage lenders, the trade group says, have been swamped with borrowers trying to get approved by the end of the month. Many potential borrowers are unlikely to make the deadline.
“Time is of the essence,” said Lucian Salvant, a spokesman for the group. “It's important for Congress to get this done, because there's whole bunch of loans that aren't' going to close on time.”
Kay Bell of Don't Mess With Taxes talks about how something like this won't help future sales in any way, but that it may be needed to help with the high number of short sales that are pending currently.
The proposal wouldn't significantly affect future home sales since the extension would apply only to home buyers with a contract in hand by April 30.But it would help buyers involved in short sales, which have become a major alternative to foreclosures in Nevada, accounting for about 30 percent of home sales in Las Vegas alone. The process, however, typically takes four to six months and there's been concern in the Silver State and elsewhere that these transactions would not be completed by the impending April 30 tax credit deadline.
Housing data from a variety of sources indicate that the hike seen this spring in pending home sales might not necessarily translate into sales as many probably won't become final by the credit's deadline.
Housing Wire cites National Association of Realtors data showing pending sales grew 6 percent in April, following a 7.1 percent spike in March. Year-on-year, NAR says pending home sales are up 22.4 percent from April 2009. Many of these latest buyers pushed their luck and bought in April in hopes that expedited mortgage paperwork would qualify them for the break. That's not going to happen in many cases, said outlook and commentary services firm Econoday senior economist Mark Rogers.
So it sounds like a ton of people bought homes, and especially short sales, in the hopes that they could close on time. Now it's turning out that they probably won't make the deadline. So now, if the bill isn't passed it's forecast that many of these sales that were showing up on the reports may never be completed, simply because they weren't able to meet the original June 30th deadline.
The jump in pending home sales seen in April and even March — ahead of the first-time homebuyer tax credit expiration on April 30 — may not necessarily translate into sales, according to outlook and commentary services firm Econoday.
By extension, the firm said, the “unexpected strength” in pending sales during recent months may not take as many homes off the market as initially suggested.
“Many pending sales may not have closed by the required [tax credit] deadline and will never close,” said Econoday senior economist Mark Rogers in recent commentary.
So now it remains to be seen if Harry Reid and his co-sponsors can convince enough of their colleagues that this needs to be done. Reid's own re-election changes may depend upon in part on getting this passed because of the high number of short sales in his area.
What do you think – should the deadline be extended past the June 30th deadline? Or do you think those people who haven't been able to close yet just played it out too long and should be out of luck? Tell me your thoughts in the comments!