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Senators differ on extending homebuyer tax credit

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WASHINGTON (AP) – Oct. 27, 2009 – Top Democrats in the Senate are pressing a plan that would extend a popular tax credit for first-time homebuyers but gradually phase it out over the course of next year.

The proposal, by Majority Leader Harry Reid, D-Nev., and Senate Finance Committee Chairman Max Baucus, D-Mont., would extend the $8,000 tax credit – which expires Nov. 30 – through March 31. Its value would drop by $2,000 for each of the subsequent three quarters of 2010.

The plan, which could face a vote in the Senate this week, appears aimed at countering a far more generous $17 billion bipartisan plan that would extend the $8,000 credit through June 30, 2010, boost the income cap for eligibility and open the credit to all buyers, rather than first-timers.

Senators are maneuvering to add the homebuyer tax credit extension to legislation to extend unemployment benefits by up to 20 weeks. That bill faces a key test vote on Tuesday.

Supporters say the tax credit has helped revive the housing market and say that if it’s cut off as scheduled at the end of next month, home sales could drop off.

Reid sought to schedule a vote on the competing measures on Monday but was blocked by top Senate Republican Mitch McConnell of Kentucky, who is demanding votes on unrelated GOP proposals.

One such proposal would require people receiving unemployment insurance to be processed through the E-Verify program to prove legal immigration status and would require all federal contractors to use E-Verify. E-Verify is an Internet-based system that employers use to check on the immigration status of new hires.

The Democratic plan also would extend the ability of money-losing businesses to claim refunds on taxes paid during profitable times up to four years ago. All businesses could take advantage of the credit; when passed in February it was limited to smaller companies with annual revenues of $15 million or less.

The provision is especially popular with homebuilders who made huge profits in the housing boom but are struggling today. Critics say it’s a giveaway to some of the very companies that helped build up the housing bubble years ago.

Builders Urge Congress to Renew Home Buyer Tax Credit to Create Jobs, Boost Economy

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October 26, 2009—In order to create hundreds of thousands of badly needed jobs and move the economy to higher ground, the National Association of Home Builders (NAHB) called on Congress to extend and expand the $8,000 first-time home buyer tax credit set to expire at the end of next month.

Testifying before the Senate Banking Committee, NAHB Chief Economist David Crowe warned that builders are reporting that business generated by entry-level buyers is already declining because it is now too late to complete a new home sale in time to take advantage of the tax credit.

“Not only will builders soon be losing one of their most effective selling tools when the $8,000 federal housing tax credit expires on Nov. 30, they are also facing significant challenges that threaten to derail the fragile housing recovery before it even has time to take root,” said Crowe. “Strict mortgage underwriting and low appraisals are making it difficult for a willing buyer to complete the sale and terms and credit availability for builder acquisition, development and construction (AD&C) loans are extremely tight. The bottom line is that housing and the economy are at a critical crossroads.”

To spur job growth, help reduce foreclosures and excess housing inventories and stabilize home values, NAHB is calling on Congress to extend the home buyer tax credit for an additional year through Nov. 30, 2010 and make it available to all purchasers of a principal residence. “We estimate this would increase home purchases by 383,000 and create nearly 350,000 jobs in the coming year,” said Crowe, adding that it would also generate $16.1 billion in wages and salaries; $12.1 billion in business income and tax income of $11.6 billion for federal, state and local governments.

Congress can also help put the housing market back to work by encouraging regulators and the banking industry to restore lending for viable home building projects and to take meaningful steps to avoid unnecessary foreclosures on outstanding AD&C loans by accommodating loan modifications and workouts.

“This would provide relief for a major sector of the economy that has suffered because of regulatory excess and the inability of banks to provide the necessary funding and flexibility that would otherwise keep loans performing as scheduled,” said Crowe.

To further contribute to a housing and economic recovery, Crowe urged Congress to call on the Federal Housing Administration, Fannie Mae and Freddie Mac to adopt new regulatory guidelines for conducting appraisals under distressed market conditions.

Citing a recent survey by NAHB that found that 25% of builders are losing sales because their appraisals are coming in below the contract price, Crowe said: “You just cannot compare a well-constructed new home with a foreclosed home that has been vacant for months and was probably neglected for a long time before it was vacated. They simply are not comparable and the standards need to be adjusted to reflect that reality.”

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First-Time Home Buyer Tax Credit Fraud

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The General Accountability Office has reportedly frozen more than 110,000 first-time home buyer tax credit refunds pending civil or criminal examinations due to allegations of fraud. The main concerns are whether or not a home purchase actually took place and if the home buyer claiming the credit is technically a first-time home buyer as defined by the IRS.

In another article about the possible first-time home buyer tax credit fraud, reporter Dawn Kopecki reports that children as young as four years old have improperly received the first-time home buyer tax credit. And, according to the Treasury’s J. Russel George, who testified before Congress recently: “They [IRS] also found that 580 taxpayers under 18 years old and therefore ineligible to buy a home claimed almost $4 million in tax credits.”

The first-time home buyer tax credit ends Nov. 30, 2009. If you do not have a property under contract by the end of October 2009 it will almost be impossible to complete the sale unless you are paying cash!

Has the Real Estate Market Bottomed in Pinellas County?

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It sure looks like the Pinellas market has bounced from the bottom as a whole. Now there are some neighborhoods which went up so fast that they are still correcting. The inventory levels are still coming down and at this pace we could see a 6 months supply by the end of the year, which most experts say would put us back into a sellers market. It would be a week sellers market based on the unemployment rate.

Have you have been sitting on the fence waiting for the prices to get better? If so, you may want to get active in your search for a home.

Also time is running out for the first time home buyers $8,000 tax credit. At this point you want to avoid short sale because they take on average 3-4 month to get approvals and you just don’t have the time!

See the stats for yourself..

mls-stats Aug 09

Need help locating a home? Call me and I’ll setup a custom home search for you today!

TWO POINTS

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The $8,000 first-time homebuyer tax credit has received a lot of attention lately, but it has also overshadowed another big reason to buy a home now: record-low interest rates. In May, 30-year mortgage rates of 5 percent were widely available. That’s down from January’s already-low 5.8 percent, and two percentage points less than in August 2008. How important is two points? On a $200,000 home, a buyer could save $257 per month ($3,084 per year) by buying now rather than last August. On a $200,000, 30-year fixed rate mortgage, the monthly payment difference is:
• 7 percent: $1,330 monthly (rates in August 2008)
• 6 percent: $1,199 monthly (rates in December 2008)
• 5 percent: $1,073 monthly (rates in May 2009)