The old credit which expires November 30th has been extended, but the expansion gives the credit to people who have owned their home for 5 years or more, and are selling their current residence in order to buy a different primary residence.
Just as there were more questions than answers in the first few days of the original tax credit, it will take a few days for the industry to digest it, and really figure it out. For example, I’ve read conflicting reports today as to whether a move-up buyer actually has to sell the current property, or whether it has to sell before the new purchase takes place, or if he can rent out the old house and buy the new one.
From the National Association of Realtors, Here’s a link to the side by side comparison of the current tax credit and the newly extended and revised tax credit.
In the meanwhile, everyone who’s eligible thinks it’s a good thing. The real estate Industry certainly does, as well.
Here’s an article from AP on the subject:
By STEPHEN OHLEMACHER, Associated Press Writer Stephen Ohlemacher, Associated Press Writer – WASHINGTON – Missed out on Cash for Clunkers? Congress has another deal for you: Buy a home before May 1 and collect up to $6,500 from the government. If you’re a first-time homebuyer, get up to $8,000.
As part of the government’s efforts to encourage people to spend money to help revive the economy, the House voted 403-12 Thursday to expand a popular tax credit for homebuyers. The bill, which also extends unemployment benefits and expands a tax break for money-losing businesses, now goes to President Barack Obama, who plans to sign it Friday.
First-time homebuyers have been getting tax credits of up to $8,000 since January as part of the economic stimulus package. But with that housing program scheduled to expire at the end of November, the House voted to extend it into the spring — and to expand it to many people who already own homes.
Buyers who have owned their current homes at least five years would be eligible, subject to income limits, for tax credits of up to $6,500. First-time homebuyers — or people who haven’t owned homes in the previous three years — could get up to $8,000. To qualify, buyers have to sign purchase agreements before May 1 and close before July 1.
“It’s huge. I think it’s going to have a big impact,” said Patti Ketcham, who owns a real estate firm in Tallahassee, Fla. “I hope I’m right. Golly, I hope I’m right.”
Like housing markets across the country, Tallahassee’s has been depressed since even before the nation’s economy plunged into recession. There was no huge boom and bust like there was in many coastal areas, Ketcham said, “but ask anybody trying to sell a house and they’ll tell you it’s been no fun.”
The credit is available for the purchase of principal homes costing $800,000 or less, meaning vacation homes are ineligible. The credit would be phased out for individuals with annual incomes above $125,000 and for joint filers with incomes above $225,000.
Real estate agents say the first-time homebuyers’ tax credit that’s already in effect has boosted sales, much in the same way the Cash for Clunkers program increased auto sales last summer by paying car buyers as much as $4,500 for exchanging their old gas guzzlers for new, more fuel efficient models.
The agents hope the expanded housing credit will help stabilize housing markets during typically slow sales months in the winter. Today, many would-be buyers are still worried that home values could drop further, said Lawrence Yun, chief economist at the National Association of Realtors.
Once the consumer fear factor disappears, then housing can move into a sustainable recovery,” Yun said. “I think we will be there by the middle of next year. “Yun said the tax credit has helped to increase demand and reduce inventory, enabling sellers to get higher prices than they would have otherwise.
About 1.4 million first-time homebuyers had qualified for the credit through August. The Realtors estimate that 350,000 of those buyers would not have purchased their homes without the credit.
The real estate industry, including Realtors, home builders and mortgage bankers, have lobbied hard for the expanded tax credit. Lawmakers said the program will not be extended again.
Critics say the tax credit is poorly targeted because the vast majority of people receiving it would have bought homes anyway.