Snohomish County, Extending the Tax Credit for First Time Buyers
By: Don Sieb
According to the New York Times, The Democratic leaders met with the president to discuss a broad range of options to combat persistent high unemployment, officials say. The existing credit for first-time home buyers will expire at the end of next month if not extended, and two other components of the economic safety net — unemployment compensation and health care benefits for those who have been out of work for long periods — will expire at the end of the year.
Besides the likelihood of extending those measures, which were part of the $787 billion stimulus law earlier this year, the president and Congress were also weighing additional steps, given projections that jobs will continue to be lost into the middle of next year despite signs of economic recovery, possibly driving the unemployment rate above 10 percent. But they insist that any package will not add up to a second stimulus package, a prospect that would invite Republicans’ attacks on the effectiveness of the first.
Keeping the home-buyers credit and broadening it has been a priority for real estate agents and the home builders lobbies. By the time it is scheduled to expire, for home purchases that close before Dec. 1, the home-buyers credit will be responsible for nearly 400,000 sales of new and existing homes. Allowing the credit to expire this year would result in a decline in sales of homes that are not facing foreclosure just as sales of foreclosed homes are expected to pick up, Mr. Zandi said in an interview, “putting further downward pressure on house prices.” “The economic recovery will not evolve into a self-sustaining economic expansion and risks unraveling back into recession until house prices stop falling,” he added. But the tax break is not cheap. Congressional analysts put the cost in lost tax revenues at about $1 billion a month. of the credit to more home buyers through August would cost perhaps $30 billion.
While Democrats in Congress and the White House emphasize that no decisions have been made about the home buyers credit or any other measures, two officials said that the cost of extending the credit could be covered by redirecting money in the two-year $787 billion stimulus package that was scheduled to be spent after this year.
The current credit is limited to buyers who earn up to $75,000 a year, or couples who make $150,000; in gradually smaller amounts the credit is available to individuals with income from $75,000 to $95,000 and to couples making from $150,000 to $170,000. While the housing industry supports lifting the income caps so that even wealthy home buyers are eligible, White House and Congressional aides say that is not under discussion.
On Thursday, the House is expected to pass legislation from Representative Charles B. Rangel, Democrat of New York and chairman of the House Ways and Means Committee, to extend the credit through 2010 for people who have been out of the country this year in the military or intelligence or foreign services. Mr. Reid is a co-sponsor of a bipartisan Senate bill that would extend the existing credit for six months, through May.
The home-buyers credit has come in for criticism similar to that lodged against another popular stimulus program, the “Cash for Clunkers” subsidy that went to people who traded in vehicles for more fuel-efficient models — that the credit persuades people to act faster on purchases, depressing activity later. Industry officials counter that expediting home sales helps to stabilize home values now, which is essential for sustaining economic growth. And unlike car sales, home sales have a multiplier effect that spurs job-creating growth throughout the economy.
Stay tuned...HomeSeeker center will follow these developments and provide updates on this legislation.
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