Aaron's Blog

 The Senate today voted unanimously Wednesday night to extend the $8,000 tax credit for home buyers beyond its scheduled November 30, 2009 expiration date. The credit would be available until April 30, 2010. Under the new legislation the credit will also now apply to home buyers who are buying their second or subsequent home. The credit currently applies only to first time home buyer.

The Senate vote was 98 to 0

Under a compromise reached late last week, the tax credit for veteran homeowners will apply only to those who have lived in their current residence for at least five years. The credit for these buyers will be capped at $6,500 while first time buyers will continue to receive $8,000.

Income levels will be extended from the current limits of $75,000 for a single purchaser and $150,000 for couples to $125,000 and $225,000 respectively. Above those limits there are diminishing credits available.

The bill was passed as an amendment to legislation extending unemployment benefits. The House is expected to vote on the bill before the end of the week.

Housing interests, especially the National Association of Home Builders and the National Association of Realtors, has pushed strongly for the extension and the Obama administration has also lobbied heavily for its passage. However, not everyone was in favor of it.

Some critics have charged that the tax credit has merely moved sales that would have occurred sooner or later to an earlier date and that, when the credit finally does go away, the market will experience another severe downturn. A diametrically opposed opinion would have it that, while 1.4 million claims have been made, few sales were actually inspired by the credit. Others have argued that the current interest rates and low housing prices are enough of an incentive without spending tax money. The extension is expected to cost an estimated $11 billion on top of the $10 billion that has been spent to date.

There have also been charges of fraud in the operation of the program. To combat this the new law has some expanded safeguards including a minimum age of 18 for obtaining the credit, a requirement that a settlement statement accompany the tax return claiming the credit and a prohibition on non-arms length transactions.

Another criticism of the extension has been that it ends just as the "spring market" is getting underway. Diane Olick writing for CNBC's RealtyCheck said it "is sort of like offering cheap snow boots in July."

Aaron Page
Mortgage Consultant
Land Mortgage
ph 512-924-3138
fx 512-895-9144
apage@landmtg.com  
Mortgage Banker #43954

Thanks to Charlie Pitkin of The Outlaw Real Estate Group for providing this blog post.

Key takeaway is that the $6500 for existing home buyers and higher income limits for 1st time home buyers goes into effect right away. Therefore for any of your clients who are closing a new home on or after Saturday 11/7 can qualify.

Changes to the Homebuyer Tax Credit Law
Frequently Asked Questions About the New Bill
Listen to NAR President Charles McMillan's Podcast About the Bill Passing
See How the House Voted
In Depth: 2009 First-Time Home Buyer Tax Credit
Watch the Entries in the Tax Credit REALTOR Party Video Contest

More FAQs...

• Frequently asked questions about the $8,000 first-time home buyer tax credit.
• Frequently asked questions about the $6,500 tax credit for repeat home buyers.

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Charlie Pitkin
Outlaw Real Estate Group
Partner | Consultant
512-514-0302 | 866.278.4330 f
Charlie@AustinRealEstateIQ.com
www.OutlawRealEstateGroup.com