Democrats Agree to Extend Home-Buyer Tax Credit

there goes the neighborhood ....

Top Democrats in the Senate have reached an agreement to extend the soon-to-expire $8,000 tax credit for first-time homebuyers, Senate Banking Committee Chairman Christopher Dodd said Tuesday.

"We have that. Done," Dodd told reporters.

He declined to specify the details of the agreement.

But a Republican who has worked with Dodd cautioned that they were still negotiating on the measure, which could come up for a vote Tuesday evening as part of a package that would extend unemployment benefits.

"We're close, we're close but I can't get into any details until it's a done deal," said Republican Senator Johnny Isakson.

The popular tax credit, which has helped lift the housing market out of its worst slump since the Great Depression, is set to expire on Nov. 30.

Dodd and Isakson want to extend the credit through June of next year and broaden it to anyone buying a primary residence, not just first-time buyers.

Senate Majority Leader Harry Reid had backed a narrower version which would extend the full credit through March and gradually phase it out through the end of 2010.

Dodd said that the deal would merge the two proposals.

The House, which would also need to approve the measure, has yet to act.

The issue is front and center for financial markets. U.S. stocks sold off and the dollar moved sharply higher on Monday after a misleading media headline said research firm ISI Group had written that the tax credit probably would not be extended when it expires Nov. 30.

A Senate vote is expected around 6 pm Tuesday on whether to take up a bill to extend insurance benefits for unemployed workers.

If Senate Majority Leader Harry Reid can get the 60 votes needed to do that, it would clear the way for further votes and he has said he would offer a tax credit extension as an amendment.

It is not clear when those votes would take place. While it is possible those votes could come later on Tuesday night, they are more likely to be pushed to later this week or next week.

The White House has raised concerns about the cost of expanding the credit. Lawrence Summers, President Barack Obama's top economic adviser, told Reuters last week that the administration would be open to extending the existing credit but wants to see it remain focused on first-time buyers.

Simply extending the current tax credit is estimated to cost $1 billion a month.

House Speaker Nancy Pelosi appears to be waiting to take her cue from the Senate. Asked about the tax credit earlier this month, the California Democrat said "the question is, would that be just first-time homeowners or would you open it up to other purchasers of homes?"

A House Democratic aide said House leaders would likely adopt whatever language the Senate approves, which would avoid the need for negotiations to reach a compromise. Unlike the Senate, the House has already passed an extension of benefits for unemployment insurance.
Copyright 2009 Reuters.

I'm waiting for it to expire. At the price range I'm looking, I think I'll save a lot more than $8k once this artificial subsidy dries up.

Crazytree said: I'm waiting for it to expire. At the price range I'm looking, I think I'll save a lot more than $8k once this artificial subsidy dries up.

I've heard from several agents here in Austin (where the housing market is still pretty good) that in the sub-200K market the credit has just served to boost prices.

...bleach, to be expected, but still a bummer. All these NAR shirlls and lobbyists behind this homedebtor bribe need to go DIAF.

Part of me beleives that many otherwise resonable folks here in the bubble areas that have been subject to this crud for the past 6-8 years are suffering from a form of Stockholm Syndrome since they are now conviced that inflated prices make sense and that income, affordability, and jobs don't matter.

Artificially inflating prices, increasing the deficit and drawing much-needed capital from the real, producing economy, all in one shot.

Thanks guys!

The local paper had an article about the details of the new program from a blog post here.

Some details:

First-time buyers (those who have not owned a home for three years) can claim an $8,000 credit. Homeowners who buy a new principal residence after living in their current home for at least the last five years can claim up to $6,500.

Income limits: $125,000 a year for individuals, $225,000 a year for married couples.

Not saying I support this damn thing, but in typical American style, I surely want to get mine. ...so, the non-first-time-buyer inclusion now, is that just for purchases made after this bill gets signed? Or going all the way back to the initial credit? I bought my second home (after 7 years in my first) this past April. I'm guessing I'm going to be hosed on claiming any credit?

Xnarg said: Universal Housing Care.I just wish that those opposed to this Govt give-a-way program had been equally opposed to the Economic Stimulus Act of 2008 in which we were all given $1,200 bribes, errr, economic stimulus checks.

Crazytree said: I'm waiting for it to expire. At the price range I'm looking, I think I'll save a lot more than $8k once this artificial subsidy dries up.

Especially people using FHA loans. A $8,000 tax credit magically becomes a down payment for a $228,000 house using 28:1 leverage. Most Americans have 0 savings so the price will have to come down quite a bit once the government stops propping up the market.

Crazytree said: I'm waiting for it to expire. At the price range I'm looking, I think I'll save a lot more than $8k once this artificial subsidy dries up.

You actually think it's going to expire? By the time it does house prices will be back to where they were before the crash

My buddy is buying a house ... 2 years ago he sold ... moved to Florida .. rented till now ... he is buying again ... does this mean he gets nothing ?
That's how i read it .....

HumDoHamaraDo said: Let's get rid of welfare and food stamps. When 12% of the population receives food stamps, there is something really wrong with the economy.There are legitimate humanitarian programs which are truly appropriate.

However, when we expand unjustified governmental subsidies towards a large segment of the population or to the entire population tells us that something is indeed wrong with the fundamental approach, particularly when the motivation is under the guise of "economic stimulus."

I stand by my position:

Real growth comes from unfettered private sector investment and activity, not from predatory or gimmicky government programs.

kenmoreland said: The local paper had an article about the details of the new program from a blog post here.

Some details:

First-time buyers (those who have not owned a home for three years) can claim an $8,000 credit. Homeowners who buy a new principal residence after living in their current home for at least the last five years can claim up to $6,500.

Income limits: $125,000 a year for individuals, $225,000 a year for married couples.

If this is accurate anyone want to trade houses with a lease back agreement for awhile? You take title to my house and I take title to your house with a 5 year lease agreement. After 5 years we trade back and pocket the $6500 each. Free money from the government for everyone! Eliminate Poverty! Stimulate! Stimulate! What a wonderful world we live in!
!!!!

I guess the thing that I really do not understand is . . . if people are basing their decision to buy a house based simply on a mere $8,000 or less (since the credit is 10% of the sale price up to 8K max), then are these people really financially secured enough for homeownership in the first place? What will that 8K really do do a typical mortgage, knock like 75 cents off of the monthly mortgage payment? I don't understand this dumb logic at all. As others have said, this is just screwing the whole supply-vs-demand market for houses.

People who should not be buying homes and who would not otherwise be doing so are lured into purchasing by this predatory governmental practice.

PMonkeyDishwasher said: HumDoHamaraDo said: Industry cannot survive or thrive without government.Indeed. Those who doubt that are free to invest heavily in countries without stable governments. I'm sure you'll make tons of money...that the corrupt government will immediately seize.Stable governments seize money as well. In fact, often the most stable seize the most.

No one here is saying "no government at all."

That's a strawperson being forwarded by those who are pushing for governmental intervention in just about EVERY aspect of our lives.

PsychoFan said: I guess the thing that I really do not understand is . . . if people are basing their decision to buy a house based simply on a mere $8,000 or less (since the credit is 10% of the sale price up to 8K max), then are these people really financially secured enough for homeownership in the first place? What will that 8K really do do a typical mortgage, knock like 75 cents off of the monthly mortgage payment? I don't understand this dumb logic at all. As others have said, this is just screwing the whole supply-vs-demand market for houses.

What it really does is provide a down for FHA for people who don't otherwise have it. A number of people can get $8000 from family (or from the state, in someinstances). This essentially means that they are getting a no-down loan. That creates a significantly larger group of people at the bottom who can qualify and buy a home.

youre right you do need the $3.5k in cash, but can use the $8k for remainder of closing costs, taxes insurance etc.

owenscott said: My buddy is buying a house ... 2 years ago he sold ... moved to Florida .. rented till now ... he is buying again ... does this mean he gets nothing ?
That's how i read it ..... Have him wait another year. If June 30th or whatever they extend the closing deadline to isn't enough, they'll probably extend/expand it yet again. And (national median) prices will go down either way (but more if they remove the credit).

Xnarg said: HumDoHamaraDo said: ...I employ more people than the avatars you have changed.Congratulations! A real Jeff Skilling!

Have you created or saved tens of thousands of jobs just in the last couple of months!Have you created tens of thousands of avatars? Two Skillings! Ha.

nycll said: In the clunker discussion, I question Edmunds assumptions, and have already detailed the reasons.

In the 8k credit discussion, I didn't claim its impact was huge (my posts are still here), but I agree with people who said so, because the low end is doing better than the high end in most markets. Tell me again where the down payment come from for most 1st time buyers?

The difference is simple:

By now *everyone* who does not live under a rock *knows* that the cars are depreciating asset; while early everyone believes that houses are appreciating assets that is "investment in your future".