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Home Buyer Tax Credit Extension

This article was written by in Featured, Taxes. 5 comments.

Good news, everyone. The home buyer tax credit extension, after failing in the Senate last week, was finally passed by the House of Representatives earlier this week and the Senate late last night. The bill that includes the extension has been signed into law by President Obama on Friday, July 2.

Originally, before the extension, in order to qualify for the credit of a maximum $8,000 for first-time home buyers or $7,500 for long-time home owners, the house had to have been purchased (contracts signed) by April 30 and the sales had to have been closed by June 30.

This extension applies only to home buyers who met that first April 30 deadline. As the closing process can easily take more than 60 days, Congress approved an extension of the closing deadline to September 30. These two additional months will be helpful for those buyers whose closing has been delayed for any reason.

Unfortunately, this extension does not allow for new home purchases to qualify for the tax credit. The bill that was passed also doesn’t include the extension of unemployment benefits that was being considered in the bill that ended up failing in the Senate last week.

Photo: Cuba Gallery

Updated July 3, 2010 and originally published July 1, 2010. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 5 comments… read them below or add one }

avatar Ryan B

“Unfortunately, this extension does not allow for new home purchases to qualify for the tax credit”

It’s rare that one can say with confidence that “most economists” agree about something. But in this case most economists agree this tax credit was a bad idea to begin with.

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avatar Luke Landes

The credit may not have been the Holy Grail people have been hoping for. At best, it was a small short-term prop-up for the real estate sales industry, but on an individual level, it helped people better afford a house purcvhase, or at least, feel that they could better afford it.

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avatar Apex

“or at least, feel that they could better afford it.”

We all know liberal politics is feelings based but this is the most blatant admission of doing something that may be stupid because it makes some feel good that I have seen in a long time.

New contracts for home purchases in May were just released this morning. They are down 30%.

So what was the goal of this credit?

Was it to help hold up housing prices? Many people stated that as the goal. Home prices leveled off as the stock market recovered but are looking south once again. It is not conclusive yet but it doesn’t appear to have succeeded in this and its very likely that even if it did in the short term it will just go down further now once the credit is removed as evidenced by the 30% drop in new purchase contract signings in May.

Was it to jump start a recovery in housing prices? That clearly didn’t happen.

Was it to help people buy houses who otherwise couldn’t? Isn’t that how we got here in the first place? Does 8K on a 150K purchase make or break the affordability? If so, the person is cutting it too close anyway.

Was it to create jobs? Not sure how it did that other than give a few mortgage brokers and real estate agents a little extra business (of course they appear to have lost tons of business in May and probably in coming months so that doesn’t appear to have been effective).

So other than making people feel good about buying a home or making it slightly more affordable, why was this a good idea?

Ok, so lets be honest about what this was about. There are lots of things that we could help people buy or make them feel good about buying, so the idea that this was about helping people afford houses is actually pretty patently ridiculous. This was about trying to hold up housing prices and get the house prices increasing again, which would hopefully get the building cycle restarted again, get the american’s home net worth rising again, get some people back above water again, slow down the forclosure rate because of an improving housing market etc. All of those pipe dreams that stupid legislators on both sides of the isle thought this credit might help to grease the skids towards that end.

But the housing market was so drastically over-valued and the consumer is so over-leveraged, and the economy is so lacking in any strength or job growth, that the idea that a measly little housing credit can just cut through all that its just plain preposterous to even suggest this could ever have any meaningful impact. In reality a number of congressman probably realized it was mostly futile but it makes for good main street politics to throw some shekels back at the common man. And it was as much about that and appearing to be trying to do something as it was about anything.

All empirical data make it pretty obvious that this credit did not do anything other than waste government money.

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avatar FinEngr

Who knows though… with housing data taking a nosedive in May, maybe they’ll revamp the program and offer it indefinitely – until we sell our way out of this mess! :)

Think it was off 30%. Mortgage rates dropped to a new low. Builder sentiment on the decline (from last month I believe).

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avatar trisha

I think to just look at the benefits of this program as making a home affordable is short-sighted. The real benefits come when buyers reinvest the tax credit into home related products and services. This is where the “chain of events” in regard to spending starts gaining momentum. It’s like walking into a store because an advertised item is on sale and then walking out with so much more than the sale item. : )

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