Homebuyer Tax Credit Extension Crucial

The federal government’s first-time homebuyer tax credit is scheduled to expire Nov. 30. The credit, part of the Obama administration-backed economic stimulus package, rewards Americans for buying a home by cutting them a check for 10% of the purchase price up to $8,000.

Analysts attribute close to 20% of home sales nationally this year to buyers eligible for the tax credit, and the National Association of Realtors claims first-time buyers account for 50% of all sales.

While Congress is moving toward extending, expanding or replacing the tax credit, the Senate is expected to vote soon on a bill co-sponsored by Georgia Republican Johnny Isakson that would extend the deadline five months to April 30, 2010, and make the credit available to all new homebuyers, not just to first-timers. The new legislation would extend the $8,000 credit for first-time buyers and create a $6,500 credit for others so long as they have owned a home for at least five consecutive years since 2001.

Analysts opposed to a tax-credit extension question how many of the buyers the $8,000 handout actually coaxed into the market. An economist with the Brookings Institution, a nonprofit public policy organization, estimates 85% of those who have used the credit would have bought a home anyway, given low prices and mortgage rates. Of about 2 million buyers who would make use of the credit were it extended through 2010, 1.6 million would buy even without the credit, the economist estimates.

Stay tuned, we'll keep you updated on the tax credit bill as further devolpments unfold.

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