Will the Home Buyer Tax Credit be Extended Again?

Will the homebuyer tax credit be extended? Great question—a question that congressional pundits are starting to toss around. When the housing market froze last year, the first-time homebuyer tax credit ($8,000) helped to thaw it out. For a few months it looked like the program would end in November. But not only was it extended, but the homeowner’s move-up credit ($6,500) made it even more successful. This program really helped out lot of Chapel Hill and Durham buyers who purchased during this time.

And now the question is whether it will be extended again. The homebuyer tax credit is scheduled to expire April 30, 2010. (Binding contracts made before April 30th can be completed by June 30.) Analysts such as Jaret Seiberg of Concept Capital, expect Congress to phase out the credit gradually over 6 to 12 months following the April deadline.

One idea could make the transition smoother—if Congress does want to extend the credit again, that fact should be made clear ahead of time.  Last October, sales surged because buyers wanted to be within the November deadline, but contracts that would be completed after November slowed, resulting in a drop off in Durham real estate and Chapel Hill Real Estate sales around and after the November, 30 deadline.  Had buyers known about the extension, this slow down could have been avoided.  Hopefully, Congress’ intentions can be clearer this time around.

It’s hard to argue against the success of this program.  It certainly made a difference in the number of number of homes that sold in Chapel Hill and Durham.  Between 2007-2008, the area experienced a 30% decline in overall sales.  In 2009, sales were still down but only by 12%.  There is no doubt that the first time home buyer tax credit helped spur sales.  Sure, it took some time to iron out the kinks.  But why pull the rug out from under it just when the details have become better known and the program has performed so well? Still, it’s quite possible that another extension might decrease the credit rather than expanding it to more buyers like the last extension.

I mentioned one other important dynamic in a previous post—assuming that Congress doesn’t make clear their intentions ahead of time, there might be a rush to get homes under contract to meet the deadline.  Sellers know about the deadline too.   As the deadline approaches, they may be less willing to negotiate because they know buyers will need to close within a certain time frame to get the credit.   I strongly recommend that buyers find a home they want to purchase sooner rather than later. Don’t assume that the credit will still be there after April 30th and it could be decreased or disappear altogether.   Take advantage of the opportunity while it’s here and do it before the deadline is looking you in the face!