For a while now we’ve been talking about the $8,000 first time homebuyer tax credit that the Obama administration passed as a part of the 2009 Economic Stimulus package. Last week the program was expanded to allow homebuyers to use the tax credit as a down payment on FHA loans.
Now there is buzz in Washington that legislators may try to bump the first time homebuyer credit from $8,000 all the way up to $15,000. From USNews.com:
In an effort to jump-start the ailing housing market, Sen. Johnny Isakson, a Republican from Georgia (and a former real estate professional) has introduced legislation that would beef up the tax credit for first-time home buyers. Under the terms of his bill, which was introduced Wednesday, the size of the credit would expand to a maximum of $15,000 from the previous cap of $8,000, and it could be taken by anyone who buys a primary residence, instead of only by first-time home buyers. The bill would also remove the income limits that had prevented individuals making more than $75,000 a year from claiming the credit, which would be available for a year after the date of the bill’s enactment.
The article goes on to talk about how the current tax credits are missing a substantial piece of the market because it’s only targeted towards those who are first time homebuyers. The program aims to include others who are important to a housing recovery. So called “move-up buyers’. Sen. Johnnny Isakson continues:
the current tax incentive is insufficient because it misses a second set of buyers who are essential to a housing recovery. “We don’t have a recession in first-time home buyers,” a statement from the senator said. “We have a recession in the move-up market.” The legislation aims to convince these “move-up” buyers that, despite falling real estate prices and mounting job losses, now is the time to buy that larger house.
Bringing the move-up buyers back into the market is a key for a housing recovery, says James Gillespie, president and chief executive of Coldwell Banker Real Estate. “There are so many people out there that have had a lifestyle change that has taken place in their families in the last three or four years—whether it is a birth, multiple births, a marriage, a job promotion—and they are either still in their apartment or they are in their starter home or their second home, knowing that they should be moving up,” he says. Given the current market turbulence, many such buyers remain on the sidelines because they are concerned that if they buy a home today, it could decline in value in the future. “A $15,000 tax credit takes that [concern] off the books,” Gillespie says.
The legislation has been introduced, but now faces an uphill battle as it would mean another 35.5 billion dollars in additional government spending. That’s not something that a lot of lawmakers want to sign on for right now as a lot of the stimulus spending is now being called into question. Despite that, the bill now has co-sponsors from members of both parties.
As expected all sorts of real estate and mortgage industry associations are coming out in support of the bill. If it passes they expect that it would make quite an impact in improving the real estate market.
$15,000 Tax Credit Provisions
This legislation would be different from the current $8000 tax credit in several respects. Here are the main changes that we would see:
- The bill nearly doubles the first-time buyer tax credit to $15,000. (10% of the purchase price – up to $15,000)
- You wouldn’t have to be a first time homebuyer. Anyone, including move-up buyers could take advantage.
- Income requirements would be removed, so anyone, even millionaires, would be able to take advantage of the credit.
- Tax credit would be available for 1 year from the signing of the bill. That means the credit would be available well into 2010.
Is It A Good Idea?
While the $15,000 tax credit would sure be enticing if I was buying a home, or looking for an investment property, I’m not. Because of that I’m up in the air about this. I’m not sure if we need to be spending another 35.5 billion dollars on another giveaway right now. Would the improvements in the real estate market really be worth it? I don’t know that they would be.
What are your thoughts on another tax credit for homebuyers? Do you think this is a good idea that will really improve the real estate market? Is it worth another 35.5 billion dollars? Tell us your thoughts in the comments.
We are in the process of selling our condo and looking to substantially upgrade the size/cost of our house. I would take a 15k tax credit, but in theory I think it is a pretty bad idea.
I am not sure how continually trying to prop up a market that is clearly telling you that people/lenders STILL can’t afford the the current market prices is a good thing. House prices went crazy, people and lenders totally skewed the perception of what means to afford a house and have it be a blessing. Now we are struggling to ‘remember’.
Artificially keeping the prices inflated isn’t the answer IMO.
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I think it’s a good idea. Unlike many of the bailout programs that reward failure and punish success, the existing home buyer credit helped people who generally had their finances in order. With the tougher lending policies in place, buyers must be much more qualified today to buy a house than previously. If a $15K credit gets those qualified potential homebuyers back into the market, I feel that it is a good thing. Expanding the program beyond first time buyers will be a real help as well.
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We are looking to buy another house, and $15,000 would definitely help…but at what cost? What I believe most don’t realize is that this money will eventually come from us, the taxpayers. Government spending has become completely ridiculous.
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Not sure if it’s a good idea or not but that would help me a lot! We’ll be looking to buy within the year but we don’t qualify for the first time home buyers tax credit.
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If they wrangle about it a little longer, I might be able to take advantage of it when my husband finishes his Ph.D. and we get ready to move on. On a wider scale, though, I am inclined to agree with The Happy Rock. Won’t this just artificially prop up the housing market, taking it longer to reach the bottom? Or, worse, perhaps it would create another housing bubble — one that pops when the tax credit is no longer available. The limitations of the current tax credit blunts some of the potential for a bubble. I’m not sure this new idea would.
I’m pretty sure this is a bad idea, but I admit to considering the possibilities for personal gain. We are considering moving at some point in the next 5 years and this could be the push we need.
But seriously, how much more debt does our country require?
Yeah, I agree with the above comments – we’re also probably looking to buy within the year and if the $15,000 can be applied to the down payment like the $8,000 can that would make it extremely attractive for us, especially because we could have almost all of a 20% down payment covered and step right into mortgage payments without worrying about saving up a huge down payment. But then again – where is all the money going to come from?
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What about those of us who are not looking to buy another home? My husband and I built and moved into our “dream home” 3 years ago. We don’t get any stimulus – oh wait – I forgot our $13 per week!!
That really helps a lot with two teenagers in the house!!
What’s the matter, living in your dream house with you husband and children is not reward enough–that was kind of a disgusting comment. Why does everyone think they are entitled to something?
I think she was making a point… Why are those buying a house now entitled to something? My Father is a Realtor, this would be great for him but not so good for his grandchildren and their children. We are hocking our kids future to make today a little better. Keyword “little”. The question is it worth it? I’m on the fence on this one…
I agree with byran. pretty disgusting to already have the home of your dreams and still not be satisfied. if this gives some of the rest of us a chance to have a dream, i’m all for it- at any cost.
While I would appreciate a “free” $15k, I don’t think this is a good idea. Government spending is going berserk and we’ll be paying for this for a LONG time.
That said, if this actually does pass, I might end up taking advantage of it. Hypocritical, I know.
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Hey, if you’re helping pay for it, you may as well get your money’s worth. :)
How long will this take to be approved? I could use this now! Like Peter said, if you’re helping to pay for it, you may as well get your money’s worth.
This is great news. I hope this will help jump start home sales in California. I am going to place your link on Twitter so others can follow your blog.
David Founder of
HomeInspectionsServices.org
I don’t know if it will, but it could do both good or bad to the real estate industry. We all know $15,000 is a lot, and where are we going to get those funds especially if everyone is qualified?
I see both the good and the bad of the $15,000 homebuyer’s credit. I am considering buying a house now and would love to take advantage of the $15k. It does throw our contry further in debt and reduces the value of the dollar. On the flip side, If I am using the $15k to buy a house, I am going to turn around and put money back into the economy with property taxes and increased spending on my home. The homebuliders will then get to pay taxes on the income they generate of the sale of the house. The individuals that get to work on the house will be paying taxes on their wages. The companies that sell the supplies will be paying taxes on the supplies. While the $15k creates a huge deficit to make up, I think it will definitely stimulate the economy and a fair portion of it will be repaid. I believe it will create jobs in the construction industry. Also, as a side note, it was not so much the banks that created the lending situation as it was the mortgage brokers and the individuals that allowed them self to be sold on an idea that they COULD afford more of a house than they should be trying to afford. To keep that from happening again, require mortgage brokers/lenders to spend a little bit of time with their customers to educate them on the impact of the loan, adjustable interest rates, and other factors that have truly led to this delimma.
I am in the process of buying a house. I have 10% to put down, plus all the closing costs and 8 months worth of money in an emergency fund even after I buy. The house is “as is” and needs a new roof, windows, and siding. I would love that $15,000 to do all the work. I will be using the $8,000 credit to do the roof for now. (The windows and siding can wait a few years.) I still am getting a great deal and great interest rate (the owner is going to hold the mortgage for me for 4 years at 3% interest rate.)
I do think if they are going to give a credit or tax break it should be for anyone who is buying a house, wether first time or not. However, I do think there should be an income cap, like $250,000 or more or something like that.
Then again I do worry about our country going further into debt and people buying a house just because of the tax credit.
Thanks for the info
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I say DO IT! ;0)
We are in the process of building a new house now & it would def help so much! Exp not knowing how our job’s will be doing a year from now…
Wow!!! I just ammended my taxes for 2008 and recieved the 8000.00 tax credit for purchasing in April of 2009… Will I be eligible for the difference? I will ammend again!!!
How long did it take to get your check? we bought a house in may ammended right away and are still waiting?
Would this be back dated? I mean I owned a house just refinanced a year ago and then was work relocated; in the process of selling my old house and bought another one. I was screwed out of the first 8,000 because I wasnt a born-again first time home buyer and now I closed on my new house just 2 months ago! The 15,000 would help a lot because I bought an “As-Is” that needed a new roof, gutters, water heater and soon will need a HVAC.
This would definitely stimulate the housing market. Because the $7000, then $8000 was limited to first-time buyers, there was little benefit to housing. Aside from the meager $13 a week tax cut, this is the first true stimulus that directly potentially benefits all over-burdened taxpayers.
First-time buyers need homes to buy, which means current first-time homeowners need to sell to keep the chain going.
I do believe however that a cap on income is required. Anyone making over $200,000 a year does not need a “free” $15000 as they can benefit from the numerous tax loopholes that currently exist.
It’s time the government gives a break to those of us taxpayers who did not make unprudent financial decisions, a rescue for the do-rights is refreshing.
Well, I think this is a great idea! Anything that gets real estate and homes bought and sold will get our economy moving. When the contractors and subs are working, then there is a trickle up/down effect that helps us all. Money is pumped into our economy the natural way, and not from bail outs. Real people buying a home and paying property taxes will stimulate the local economies around this country like no other stimulus can. This is not propping up real estate, it is making now the time to buy a home when our economy needs it the most. The sooner we can get our economy out of the dumpster and back on track, the happier we all will be.
I just hope that Congress moves on this quickly and doesn’t wait too long because people will be waiting to buy to see if is passes or not, so they don’t miss out on it. Either do it or not, but don’t just sit around and make people wait it out till the summer buying season has passed us all by. I’m an optomist, so I believe that this will pass, and I think it’s a good thing for us all.
This country is getting tired of feeling poor and bad, we want our lives back!! And this $15,000 tax credit will help.
Whether or not it’s a good idea for the country, I probably would take advantage of it.
I live in one of the last affordable middle-class neighborhoods in the central part of my city. Our Beloved Leaders, in an excess of enthusiasm to complete a light-rail system that has been a pet project for years, announced they would use stimulus money to build a leg that goes up a main drag adjoining our houses. To accomplish this, they left the tenements to the west in place and ripped out single-family homes in the economically healthy area. Now, as the rubble lies on the ground, crime spikes, and the prostitutes move their trade into our neighborhood, the City announces it doesn’t want to deal with the federal bureaucracy. So, because there’s a depression on and we have no sales-tax revenue, they’re suspending construction.
So our neighborhood is trashed. I’d like to move into a neighborhood that’s safer and not blighted with wrecked houses and weed-strewn empty lots, but to do that and stay in the area where I prefer to live will cost another fifty to a hundred grand. If the federal government would like to fork over some cash to help make me whole after the depradations of the local government, I’ll take it.
I look at it this way, irregardless to the debt the country is in we will always be in debt. Similar to individuals living in todays society who will always be in debt. I think helping stimulate the economy by helping Americans accomplish their American dream (buyin a home) is much better debt to us then spending on things that will not help families. Relax, it doesn’t matter how many people gripe and complain, they all will take the money and talk nonsense later after they’ve made there purchases. Accept it and be happy, believe me, our parents received nothing all there lives from the government. The only gave so I look at it as a great opportunity for American families to grow.
Thank you
SL ME.d
“I’m not sure if we need to be spending another 35.5 billion dollars on another giveaway right now”……. I respectfully disagree with your idea of this being yet another “giveaway”. The most recent example of a giveaway is the newly formed Government Motors (GM). I give/pay taxes to the IRS every year; this just means I’m giving a little less should I decide to purchase a home. Add up how much you pay in taxes every year through sales tax, property tax, income tax, real estate tax, etc. and you will be amazed. How much more can we give?You will be begging for additional tax credits by the time Obama finishes his spending agenda. Careful what you ask for…….
I missed the 1st time home buyer tax credit in March 2009 by 5 months. If the $15,000 tax credit for all home buyers passes and commences at time of signing the bill, I MISS THAT TOO!
I don’t like spending any more but if there is one thing that may get things going again it is the housing industry. Opening $15k to all buyers will do that in my opinion. Sure beats most of the legislation passed today or being talked about which will send up deeper in debt and not provide any jobs (i.e. stimulus, cap and trade and health care reform).
Maybe the government should just subsidize 3% loans for anyone who buys a home or refinances would help get things going. Provide lots of spending power for people and make homes look really attractive. Congress can’t do that though as it is too easy and may not BUY Obama votes.
Im all for it! Whether its good or not for our country remains to be seen however, HOw could you not get excited about a $15,000 credit for buying a home? For those lucky ones with stable jobs and good credit like myself this is HUGE!
Lou has hit the benefits of such a stimulus on the head. Why can’t the government get the interest rates to 4.0% for buyers. It would absolutely stimulate real estate and that is key to recovery. Other lofty goals should wait until we are more economically stable. Can they at least update the American public on if this bill is even being considered and a date when we will know about its passing or not? I think 4% interest rate is a bigger benefit than the tax credit of $8K
I have to say that I don’t see how anyone in their right mind could think this is a bad idea. When do we ever get free money from the government? NEVER! So, why not put an incentive out there to bring buyers out. To be honest, I was a first time homebuyer and the $8,000 credit is what pushed me to start shopping and later April 24, 2009, purchase my wife and my first home. If it wasn’t for the credit, I doubt I would have searched for purchasing a house. Honestly, to boost the economy the government needs to put more incentives out there. Give buyers lower interest rates. Work out lower student loan interest rates. Things that will entice people to want to do things. CAP the interest rates that credit card companies can charge. Think about the “little people” not just the big people.
Mel- If interest rates were at 4% the entire nation would refinance their homes. It would also falsly keep home prices inflated. Interest rates need to stay between 5.5-6.5 to keep home owners honest. People are living in their homes until they’re foreclosed on b/c they can’t come to grips w/ the fact that their home isn’t really worth what it was appraised for in 2004. It’s amazing how people can buy a home in the 90’s for 180k, flip it in 2002 for 400k, buy a new home for 450k and now be too stubborn to sell for a small loss.
I don’t mind the gov’t tax credit but there should be a cap on income.
It’s a terrible Idea. There is no need to have a “buy up” incentive plan because the incentive is already there when they sell their current home. First time home buyers are not buying new custom homes they are buying existing homes allowing those owners to sell those homes and move to a newer/larger home.
The current real estate market is so bad that anyone needing to buy a condo with an FHA loan is rather out of luck. Condo Associations are in such sad shape that they can’t qualify for an FHA loan….
This bill was aimed at first time home buyers. A great majority of these buyers would be able only to afford a condo. Therefore, the loans would not be available. If the $8000 credit would be extended into 2010, many condos associations may have become more stable
and therefore qualify for the FHA loan..Or, , , more people may have
saved enough to put the lowest amount down (10%) for a conventional loan. In either case, this would stimulate our nearly comatose real estate market.
So can someone answer this. Do an individual actually get the $8000.00 in hand?
That depends. If you owe on your taxes, you’ll get $8,000 minus whatever you owe. But say you’re already getting a refund, you should then get a refund – plus your $8000 credit.
If they expand the credit to everybody, I hope they keep investors in the exception, because investors would not help neither the economy nor the regular home buyer. When an investor buys houses, He will hold them until favorable times to resale, thus causing no progress to the economy and largely slowing the regular home buyer possibilities by causing the supply of homes to shrink an prices to inflate, and don’t forget; we all will have to pay the cost of this credit in the form of taxes (not only the investor)
Great point! Investors are he ones screwing this hole thing up for the rest of us. By letting invesrtors in this deal it’s only making the rich richer.
Right now I have been struggling with the credit reporting agencies to fix my credit after numerous flaws have damaged my score. I have been trying to buy a home, but I cant get the score to jump fast enough. The 8,000 tax break is just what i need to afford a home. I understand that some people feel as if the government is giving home buyers free money, but in all honesty i pay taxes, and Ive seen what some big business have done with our money, and they managed to get help. Well, consider this the governments way of helping out the average american for all they have done for their government. If it wasnt for my tax dollars the government wouldnt have the money in the first place. They’ve taken my money and made money off of it, and i appreiciate the fact they are helping americans out in return.
With the tax break i would pay off any and all debt and would be able to afford a house payment. This is a great incentive and would not be able to afford a home if it werent for the 8,000.
Yes I think this would be a great Tax credit to hepl inprove the sales of homes.
I like the Idea of increasing the credit to 15k but I think it should still be limited to first time home buyers. If people that own homes buy newer bigger homes what are they going to do with heir first home? Will they let it go into foreclosure, which would in a round about way get us right back into the same situation in the housing market. Foreclosures will increase and will in turn make that “move up” buyers new home price deflate. Or will they be able to pay for it until the market swings and they can regain their original investment? If we limit it to first time buyers there will be less homes on the market, which will in turn make the “move up” buyers property value increase. Then allow them to reclaim their original investment and move up.
My wife and I purchased our home in April 2009. But,even though I was a first time home buyer,we didn’t qualify for the $8000 because my wife owned a home(we married in 2008)in the previous 3 years.(we figured this was a slap-in-the-face to married couples with the same predictament. But oh,if a couple was fornicating(living together) and the situation was the same,they could have gotten it,just put the house in his name) Anyway,does anyone know if this will be retro-active. We would love to even just get the $8000.
Parts of the 15k is a good idea. I have been looking into purchasing for a while now, with getting laid-off, injuries/illness and loss of medical, I no longer have any means for a down payment. I don’t believe it should be available for everyone. If your a millionaire you can afford down payments, closing cost, etc. The kinds of houses a millionaire would be looking to purchase is more of a luxury then a practicality. The people who really need this credit are the ones who just want a roof over their heads with enough room for their family. Even if it doesn’t go to 15k, I would just like to see the 8k get extended so the lower guys/gals on the totem pole can find a permanent place to live.
In all fairness the income limit for single 1st time home buyers should be raised. It seems a dirty trick, especially in California (Bay Area) that I can not make more than $75,000 to recieve the $8000 tax credit. Single people making less than that have a hard time buying Anything in the high cost of living cities. And couples, with duel income house holds have a higher income ceiling??? Whats this about? Hey you two make more money so lets give you more opportunity then that single income person! Makes sense…Not.
Check out this story about the extension of the housing tax credit:
http://abclocal.go.com/wabc/story?section=news/politics&id=7087955
If you want to skip it, here’s the interesting part (which they do not explain in detail):
1,400,000 homebuyers have taken advantage of the tax credit.
The story specifically states that NAR estimates that 350,000 of those wouldn’t have purchased without the tax credit, meaning 1,050,000 would still have purchased without the tax credit.
This means the total cost of the program breaks down like this:
1,400,000 x 8,000 = $11,200,000,000 (11.2 BILLION)
This means the total cost to give the 350,000 people who wouldn’t have purchased a home without the tax credit was the 11.2 Billion; which means:
11,200,000,000 / 350,000 = $32,000 per transaction
So:
It cost $32,000 for each individual who got the $8,000 tax credit, to motivate them to purchase a new home.
Wow.
we are closing on a home on the 22nd of january .we are first time home buyers .i have heard that they are behind on the tax cedit .does anyone know if this is true ? We dont know if we file our taxes with the credit if it will hold up our regular taxes.Or if we should file then ammend our taxes and get the credit.does anyone out there know or have any advice for us?thanks for any input
Can’t be happy about helping everyone else buy a new house.
D.W.
My wife and I have been married 38 years and have decided it is time to purchase, by the way this is our first home. We raised our children, and
have not pushed having our own home. We are now able to settle down and live the rest of our lives building equity for our children and grandchildren. By the way we have never had to replace a roof, waterheater or other things that pop up if you own your own home. We are purchasing a home that already has been remodeled inside and out. All we have to do is tweek the things that we need to change, there is
a lot of landscaping that needs done, but we have time to accomplish
it. We are excited because we know this will be our last move, and
what we do will be passed on to the next generation. I believe our
family will know why we waited to buy after we had both retired.
Increasing the tax credit will increase the number of homes sold.
The initial short term effect on the economy will be negative,but its long term effect will be very positive for the economy.This isn’t Rocket science.
I feel the the government should renew the tax credit for the people who wants to purchase a home. I am looking to purchase a home and this would really help me. I also think the 15,000 dollars would be great because for those of us who really need it, we can do a lot with that money. I will be looking out for the legislation. I hope and pray it passes.