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$6,500 "Move-Up" Credit Explained by the Senator Who Invented It

Obama to sign legislation tomorrow - will extend to June 30, 2010 - First Time Home Buyers still $8,000 and Some Existing Home Buyers Qualify for NEW $6,500 “Move-Up” credit ...

November 5, 2009

Congress acted with urgency today to get the Unemployment and Housing Credit bill out before the Unemployment numbers are reported tomorrow. As part of this, the House accepted the Senate amendments to the bill Extending and Expanding the Home Buyer Tax Credit. As reported in the New York Times, minutes ago, the existing credit will both be extended through the first part of 2010 and expanded to higher income buyers. A new $6,500 credit will be there for some long-time existing homeowners, moving to a new home.

Some cheer, others not so. Is this the right thing to do? As real estate professionals we look forward to the increased activity, but what are the unintended consequences of congressional meddling with the market economy (see Clunkers and see Barney Frank demanding expanded qualification guidelines at FNMA.) How will it be paid for? The projection is that this extension will double to $21 billion the cost of the program.


Here are the important points:

$8,000 First Time Home Buyers credit continues

New $6,500 for existing “Move-Up” homebuyers

- Same home for 5 yrs of past 8-yr period

Contracts (EMA) signed by 4/30/10

Closings before 7/1/10

Home purchase price of $800,000 or less

Income limits expanded

- Old: $75,000 single, $150,000 Married

- New: $125,000 single, $225,000 Married

Tax Return filing will require HUD-1 be Attached

If you are a glutton for punishment, here is the text of the legislation.

As we have told you in the past, the true champion of the Housing Credit Extension is Senator Johnny Isakson (R-GA) a Realtor of 33 years. Here is what he had to say to explain the need for this extension AND expansion now:

“In addition to the $8,000 credit extension for first-time home buyers, a move-up buyer tax credit of $6,500. This is the cornerstone of the substitute before us now. It offers to any previous homeowner who has lived in their home for at least the last 5 years the opportunity to sell that home, invest in a new home, and take up to a $6,500 tax credit. That is going to help us boost what is the problem in the U.S. housing economy today, and that is what is called the move-up market. It is the gentleman who is transferred from Delaware with Hercules to Brunswick, GA, who cannot sell his house in Wilmington and cannot buy a house in Brunswick because the markets are so frozen and the move-up market is dead. Now he has an opportunity to sell that house and have an incentive for its purchase in Delaware and an incentive to come and reinvest that money in Georgia in a house in Brunswick. It will make a measurable difference over the next 7 months in our economy.

“We also raised the means test on income from $75,000 to $150,000, which is in the current credit, to $150,000 and $225,000 in the new bill for both move-up buyers as well as first-time home buyers. Those income thresholds will open the incentive to more Americans and I think will show a measurable increase in the amount of business that takes place.

“In response to the Internal Revenue Service concerns we expressed a few months ago on fraud, we put in every single request they made for fraud to see to it the HUD-1 is attached to tax statements, to see to it there is no fraudulent claim of the money, and to see to it the IRS has every tool they can to prosecute to the fullest anybody who would abuse this credit.”
Posted Thursday Nov 05