The Scoop on the $15,000 Tax Credit for Home Buyers
February 9th, 2009 categories: Central Connecticut News & Information, Home Buyers, Home Sellers
Whether you call it pork or stimulus, the bill being argued today in the Senate (and possibly voted on tomorrow) contains a significant incentive for some home buyers. $15,000 of incentive.
“I’m gonna run out and buy me a house.”
That’s what the National Association of Realtors, National Association of Home Builders, Connecticut Association of Realtors and even RE/MAX’s corporate office is hoping home buyers will be thinking (my inbox is chock-full of call-to-action e-mails from these organizations, telling me to call my Senator TODAY).
While the final details of the tax credit have yet to be screwed up approved by the Senate and then the President, the credit has been getting a lot of attention.
Here’s the Scoop…
- Up to 10% of the purchase price of a home, to a maximum of $15,000. Credit is applied to taxes you pay.
- Can be split over two years, but tax credit can only be used for purchases made up to one year from date of enactment.
- No income limits. (Unlike the $7,500 credit)
- Primary homes only and buyers must live in home for two years. New or existing houses.
- Does not have to be repaid, unless you sell before the two years. (Unlike the $7,500 credit)
- I don’t know if this cancels out the $7,500 credit, which was to be in effect until June 30th, 2009 or if it’s an either/or situation.
Who benefits?
Home sellers and buyers in middle - higher price ranges, temporarily.
The benefit is geared towards households who earn more than the median household salary in Connecticut. In order to receive the maximum benefit, a household would need to make earn more than $80,000/year.
Unintended Consequences
The Real Estate Bloggers has pointed out that one of the issues this bill creates is that people will hold off on buying homes until the credit is put into effect. If there is a delay, a major change or the bill isn’t passed in it’s current form, home buyers have been told there is a major problem in the housing market that has to be fixed.
So, buyers may wait until it’s been “fixed.” And just when home buyers and sellers were becoming resigned to the fact that housing prices sometimes go up, and sometimes they go down.
My concern is that the credit will extend the housing market decline. It’s entirely possible that the credit will drive more sellers to list (so they, too, can take advantage of the credit), trading down or up. According to Calculated Risk, the credit would not decrease housing supply at all.
It’s also possible that the credit will encourage home sellers to be overly optimistic about their home’s value, whether or not the credit increases actual demand.
You may also enjoy:
The New Housing Bill’s Impact on Home Buyers
Just How Did We Get Into This Mortgage Mess?
FOR THOSE WHO BOUGHT IN JANUARY:
THE HOUSE PASSED THE BILL FOR A $7500 TAX CREDIT THAT DOESN’T NEED TO BE REPAID AND IS AFFECTIVE FOR PURCHASES OF HOMES AFTER 01/01/09.
THE SENATE CHANGED IT TO A $15,000 TAX CREDIT BUT IT IS ONLY AFFECTIVE FOR PEOPLE WHO PURCHASES AFTER IT’S SIGNED.
IF THE SENATE PASSES THERE’S TODAY, THEN THERE WILL BE A MEETING BETWEEN MEMBERS OF THE SENATE AND MEMBERS OF THE HOUSE TO WORK OUT THE DIFFERENCES BETWEEN THE 2 BILLS.
I BOUGHT IN JANUARY SO I OBVIOUSLY WANT THE $15,000 TAX CREDIT THE SENATE PROPOSED BUT WITH THE START DATE THE HOUSE PROPOSED.
YOU NEED TO MAKE YOUR VOICE HEARD AND CONTACT YOUR SENATORS AND HOUSE REPRESENTATIVE. THIS IS AMERICA SO YOUR VOICE IS YOUR POWER. E-MAIL THEM OR CALL THEM. HERE IS A CONVENIENT NUMBER. CALL AND ENTER YOU ZIP CODE AND IT WILL GET YOU IN CONTACT WITH ALL OF YOUR CONGRESSMEN. DECISIONS ARE BEING MADE, DO IT NOW. 1-866-924-NAHB (6242)
It’ll be interesting how the two bills will be reconciled.
Neither house nor senate provision has much to do with creating 4 million jobs — and that should be the sole criterion for writing your representative. Stimulating fees and commissions related to potential increased RE transactions doesn’t cut it. Like all of the other Republican/Centrist tax cut crap in the two bills, there is no evidence that $1 of tax cuts provides anywhere near the stimulus as $1 of spending. But fact based decision making is not a Congressional specialty. I say all this as someone destined to get either the 7500 or 15000 later this year. I am not writing nor supporting either option.
Facts in Congress?
I don’t know how many people will be motivated to buy using the $15,000 credit…people who weren’t thinking of buying already and have decent credit. I think this might just be more of giving money to people for doing something they were going to do anyway.
Personally, I think there should be more incentives for people to buy investment property. To buy investment property these days you need 20% down…and investors take huge amounts of risk in becoming landlords.
[…] And after all that work on my last post, The Scoop on the $15,000 Tax Credit for Home Buyers. […]