Will Congress Extend the First-Time Home Buyer Tax Credit? By Nick Timiraos Wall Street Journal 08-24-09

Will Congress Extend the First-Time Home Buyer Tax Credit?
By Nick Timiraos
Wall Street Journal
August 24, 2009

One big question looming over Congress when it returns from its summer recess next month: what to do about that $8,000 tax credit for first-time home buyers?

Not only are some legislators (and real-estate industry lobbyists) already pushing hard for an extension of the tax credit, which will expire Nov. 30, but they’re also arguing that it should be increased, to $15,000, and expanded to all buyers, and not just those who are first-timers. The current $8,000 tax credit emerged in the stimulus legislation that Congress passed in February, replacing an existing $7,500 credit that had to be repaid over 15 years.

“Congress is not going to endanger the fragile beginnings of a housing recovery by letting the credit lapse,” said Howard Glaser, a mortgage-industry consultant in Washington, in this story on July’s strong home sales figures in Saturday’s WSJ. The story noted that Senate Majority Leader Harry Reid, who faces a tough election fight next year in Nevada, a state hard-hit by the housing bust, favors extending the credit.

But columnist Kenneth Harney notes in his latest column that Congress faces a number of high-profile issues (health-care, anyone?) that face Congress upon legislators’ return, and those priority issues could get in the way. “On top of that, a tax credit extension would cost billions in lost revenue — a big negative when the federal budget deficit is in record red-ink territory,” he writes.

Meanwhile, there’s an argument to be made that the housing market is now much closer to a bottom than it was in early 2009 or mid 2008, when the previous tax credits were implemented. The idea behind those credits, in part, was that they would help give buyers some insurance against future price declines. With housing markets nearing some type of stabilization (at least those for first timers), does that rationale still hold? Many first-time buyer markets are now seeing bidding wars and low prices that could be enough to spur demand without any stimulus.

Even though the credit actually expires on Nov. 30, buyers may not want to wait until the last minute (and Thanksgiving weekend) to take advantage of it, notes mortgage broker and blogger Dan Green. “Schedule your closing for the week of November 16, 2009, instead. That way you’ll have plenty of time to work through whatever needs to be worked out in connection with your home and your home loan,” he writes on his blog. Readers, what do you think: should Congress extend the tax credit, expand the tax credit, or let it expire?