$8,000 New Home Buyer Tax Credit, $6,500 Old Home Buyer Tax Credit
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The Senate last night passed an extension of the $8,000 Home Buyer Tax Credit for new home buyers and added on a $6,500 bonus for those who are buying a new home and have lived in their old home for 5 of the 8 previous years. The House of Representatives is expected to pass the bill and the White House has said they will sign it.
So what does it mean? I think most of those that wanted to buy and were conscious of the benefits of this government handout have already taken advantage of it. So to not have a complete flop, the government added the $6,500 kicker for those who have already owned a home.
This is one of the few things the Federal Government has done that has actually worked in the past couple of years. Congress persons needs some success to take home to their districts, and if they turn the home buyer tax credit from a success to a failure with the extension it would be a mite bit embarrassing.
The extension, according to Walter Molony, a spokesman for the National Association of Realtors in Washington, D.C., would require homebuyers to have a contract in place by April 30, but they then would have 60 days to close on the house, which would give them until the end of June.
The bill also would extend the credit to existing homeowners for a lower dollar amount — $6,500. Existing homeowners would have to have used their current home as a principal residence for at least five of the past eight years to qualify.
Cameron Findlay, chief economist for LendingTree.com in Charlotte, N.C., said the success or failure of the tax credit program will be regionalized because the impact of the $8,000 credit is greater in a state such as Pennsylvania, where homes cost less, than in California, where they are significantly more expensive. For the sake of comparison, Mr. Findlay said the average list price of a home in Pennsylvania is $286,000, while in California it’s $716,000. via the Pittsburgh Post Gazette.
A couple of quick questions:
- This program is expected to end April 30th, just before the summer peak market conditions. Will the elected officials have the intestinal fortitude to not renew the legislation at the end or will this turn into a permanent subsidy?
- The $8,000 new home buyer credit is available for those who have not owned a home in the past 3 years. The $6,500 credit is for those who lived in their home 5 of the 8 previous years. If you lived in a home for years 1–5 and then rented it for years 6–8 can you qualify for both credits?
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Comment by Portland Real Estate on 5 November 2009:
Now the question is whether this was a good idea or not. It seems to expensive to keep doing.
-Tyler
Comment by Chelan Realtor on 5 November 2009:
Goldman Sachs estimates that only 200,000 incremental home sales were caused by the “Buyers’” tax credit. They also believe that prices increased by that amount which certainly does not benefit buyers.
So, let’s do the math. The program ending Nov 30th cost $16 billion divided by 200,000 is $73,500 of cost per incremental sale. Most of the incremental sales were front loaded and occurred shortly after the program was put in place. The extension should have an even lower ratio of incremental sales to benefits paid!
Do you really think that putting taxpayers on the hook for amounts estimated to be as high as $250k to $300k per incremental sale is a good idea?
Comment by Gainesville Real Estate on 5 November 2009:
This is great news (for homebuyers and people in the industry)! Not very good news for the national deficit.
Comment by Allen Witt on 5 November 2009:
I sold a house in august, that I had lived in for eight years. I’m closing on a new home next week. Am I eligible for the $6,500 or do I need to postpone the close.
Comment by Arlo Moehlenoah on 6 November 2009:
I have the same situation. I sold my home in July and am scheduled to to close in a few weeks. Should I postpone my closing until Dec. 1?
Comment by Portland Real Estate on 9 November 2009:
Now we just have to sit back and wait for the bill that we all get to pay for the benefit of a few. -Tyler
Comment by Linda on 11 November 2009:
I purchased my home condo in 2003 so I have owned it 6yrs but have always lived there. I am buying another home. Do I qualify for the tax credit or not?
Is a land contract purchase one that would qualify for the tax credit?
Comment by Carol on 11 November 2009:
I sold my home of ten years in 2007 and moved in with my sister. I am closing on a house in November. Will I qualify for the 6500 or will I fall between the cracks on both.
Comment by Michael on 18 November 2009:
Is the $6500 tax credit available to homeowners who purchased a home in June 2009 (and owned a home for required 5+ years) or just to buyers who purchase the home after November 6, 2009? I hope someone can clarify this for me.
Comment by Ernest Rovira on 28 November 2009:
I resided in my former home for more than 6 years in November 08 I bought another house wich became my place of residence in Jan 09 , can you tell If I qualify for the 6500 or ?
Comment by teresa on 4 December 2009:
i bought a home in march 2008 do i qualify for first time home buyer credit
Comment by MAVERICK ROBINSON on 6 December 2009:
I PURCHASED A HOME 6/2006 AM I ELIGABLE FOR A TAX CREDIT?
Comment by Don on 15 December 2009:
Quite honestly I see the tax credit, at the very least, a step in the right direction to put an end to this housing crisis. The real problem is that many more homeowners are going to fall victims of foreclosure as the next wave of foreclosures hit. According to Credit Suisse, this upcoming wave is expected to be larger than the last wave of foreclosures, and will begin this summer and peak during the summer of 2011. The current tax credit will do nothing to stop it however. The banking industry is to blame for all of this and they are the only ones that will get us out of it. The problem is they are sitting idley by doing nothing.
Comment by Jane North on 18 December 2009:
I resided in my former home for 18 yrs and bought a new home in Jan 2009. do i qualify for the 6500.00 tax credit.
Comment by april on 24 January 2010:
We bought a home 3 and a half years ago. Are we eligable for either tax credit, or do we fall through the cracks?
Comment by Terrea on 4 February 2010:
1.My husband purchased his home in 2002, when we married in 2009 he moved into the home that I purchased (in 2007). Does he qualify for the $6500.00?
2.I purchased my home in 2007 do I qualify for the 6500.00? Thanks