Homebuyer Tax Credit Extension In The Works

Prospective homebuyers may no longer need to rush to open houses or speed through paperwork—senators have hammered out a plan to extend the popular First Time Homebuyer Tax Credit past the November deadline, plus offer a reduced tax credit to repeat homebuyers who qualify. While lawmakers have figured out the bulk of the tax credit deal, it still awaits approval from the entire Senate and the House before it becomes law.

Despite recent allegations of homebuyers fraudulently claiming the $8,000 tax credit and criticisms that the extended tax credit would be unnecessary spending of stimulus funds, renewed life for the tax credit appears very popular among legislators. The expanded tax credit plan would accept contracts until the end of April 2010 and must be closed before July 1. In addition to the potential $8,000 tax credit for new home buyers, the new tax credit would also provide up to $6,500 credit for repeat homebuyers who have lived in their home for at least five consecutive years and are looking to move. Repeat homebuyers qualify if they make less than $125,000 a year for individuals and $225,000 a year for couples.

“This credit has brought new families into the housing market and contributed to three consecutive months of rising home prices nationwide,” Treasury Secretary Timothy Geithner said in a statement to MarketWatch.

The extended credit could further prop up the housing market because many more homebuyers can benefit from the tax credit than before. Home sales rebounded to the highest level in two years with a near 10% increase in September—we could see these figures magnify in the coming months to get the housing market back on its feet.

However, more recent home sale dips have stalled signs of recovery and suggests that the market is slowing down as the current tax credit nears its November deadline. Legislators are hoping that the new extension may be enough of a jumpstart to pick-up home sales, get home values increasing, and properties hot enough to get the market booming again. Like putting in a more gas until the engine gets up and running by itself, supporters insist that it’s the bigger boost needed to keep the economy revving again. On the other hand, these temporary government stimulus measures can’t prop up the economy forever.

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