Tax Credit Extension & Expansion
The Senate is nearing a compromise that would extend the tax credit for first-time home buyers and expand it to include current homeowners.
Who would get the credit and how much could they claim? First-time home buyers would be eligible for up to $8,000 on the tax credit, which is the same as the current credit. The Senate version of the bill creates a new credit of up to $6,500 for homeowners who have lived in the homes for five years and would raise the income limits to $125,000 for individuals and $225,000 for couples.
How long will it last? The tax credits would expire on April 30, 2010 but home buyers under contract by April 30 would be able to qualify as long as they complete the sale within 60 days.
What does this mean for home buyers? First many more people will now qualify. After all, two-thirds of American families own their own home and most earn less than the proposed income limits.
So will the expanded tax credit help sales? That's a point of debate among housing analysts and economists. Alex Phillips, economist at Goldman Sachs, notes that expanding the credit to people who all ready own homes doesn't necessarily make a big dent in the supply of housing on the market. "If these 'step-up' buyers all ready own a home and sell it ot finance the new one, that hasn't reduced the amount of inventory for sale," he says.
But Mark Zandi, chief economist at Moody's Economy.com, thinks the extension is a big deal. "The tax credit is not a very efficient tax cut, but not extending it would do significant damage to the still fragile housing market," Mr. Zandi said.
Readers, what do you think? Is this tax credit going to help the real estate market?