$8,000 Tax Credit – Many Buyers in Limbo
A decision should be reached soon on the fate of the $8,000 tax credit to first-time homebuyers. Most Realtors will tell you that sales have slackened due to the fact that now it’s too late to find a home, go to contract, and close by the current November 30, 2009 deadline. Many buyers rushed in and bought homes which weren’t really the ones they wanted just because they were in a hurry to get in before the deadline. Now many are sitting on the sidelines waiting for a decision on the extention.
Obama on Thursday, Oct. 28, approved the extension verbally, and Senate Majority Leader, Harry Reid, a Democrat, along with a top Republican, Mitch McConnell, both agree. Treasurey Secretary Gimothy Geithner and HUD Secretary, Shaun Donovan, together said the same day that they were urging Congress to extend the Tax Credit. A Senate decision could be reached early next week and from reports in various news sources would look something like following:
1) Instead of $8,000 credit, a buyer could obtain a credit up to 10% of the purchase price or $7,250 whichever is less. This would apply to buyers who have not owned a home in the last 3 years. The income limit would still be $75,000 for an individual and $150,000 for couples
2) This credit would be for buyers who sign a contract by April 30, 2010, and then give them 60 days to close.
3) In addition, buyers who have owned and occupied a home for the last 5 years could obtain a $6,500 tax credit if they wanted to move move up. The income limit for these move-up buyers would be $125,000 for individuals and $225,000 for couples.
The effect of all this on house sales in still debatable. To be a buyer having owned a home for the 5 year criteria and to obtain the $6,500 credit, if the person has to sale his current home in order to purchase another one, that would put more inventory on the market. Eventhough his income limit has been raised, he couldn’t purchase anyting over $800,000 in price.
According to Treasury Secretary, Timothy Geithner, the tax credit has been instrumental in the increased house sales for the past 3 months. Realtors will also attest to that. It’s hoped that extending the tax credit will continue to spur home sales, and that in turn will rid the housing market of excess inventory. Reducing the inventory of homes will stabalize the housing market, and maybe we can get back to a condtion where people who want to sell their home in order to move down or move up or move out, don’t have to compete with the low prices set by short sales and bank owned homes. There are a lot of sellers out there in that waiting position.
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