Expanded First Time Buyer Tax Credit Set To Expire

by Joel Barkman, NVBIA Fauquier County Chapter President

After consecutive months of increases, sales of newly built, single-family homes have been falling since September, according to data released by the U.S. Commerce Department.

"This critical loss of momentum corresponds with the ending of the $8,000 first-time home buyer tax credit," said Joe Robson, chairman of the National Association of Home Builders (NAHB). "The fact that sales are now heading downward just shows how important the tax credit has been for stimulating buyer demand up to this point."

Perhaps just in time, NAHB is applauding Congress for passing legislation that will extend and expand the $8,000 first-time home buyer tax credit, stating that this will provide a much-needed boost to the fragile housing market and economy.

"We commend lawmakers for acting in a bipartisan manner to extend the first-time home buyer tax credit beyond its Nov. 30 deadline and expand it to a wider group of home buyers," said NAHB Chairman. "[The] action by Congress will further stabilize housing and the economy by creating new jobs, stimulating home sales, reducing foreclosures, cutting excess inventories and stabilizing home prices."

The new law will extend the $8,000 credit for first-time home buyers for sales contracts entered into by April 30, 2010 and closed by June 30.

Further, it has been expanded to include a new $6,500 credit for owners of existing homes who are purchasing a new principal residence. An existing home owner can claim the $6,500 tax credit if they have been residing in their principal residence for five consecutive years out of the last eight.

Additionally, the income eligibility limits to claim the full credit amount for both groups of home buyers have been raised to $125,000 for individuals and $225,000 for married couples.

The legislation, which also extends unemployment insurance benefits and offers relief to cash-strapped firms by providing broader tax benefits for businesses with net operating losses (NOLs), is expected to be signed into law.

"The new NOL rules will throw a lifeline to struggling businesses, allowing them to continue making payrolls, paying business loans and otherwise keep their doors open until the economic recovery takes hold," said Robson.

The inventory of new homes on the market continued downward for a 29th consecutive month, to 251,000 units as of this past September. This is the lowest inventory since November 1982 - a most welcome trend if we are to see the housing market stabilize in the near future.

NAHB estimates that the extended and expanded home buyer tax credit will create 211,000 jobs and generate 180,000 additional home sales in the coming year. It is also expected to generate $9.6 billion in wage income and $6.9 billion in federal, state and local taxes.

Given the crucial importance of housing to the national economy and the fragile state of the emerging recovery, I am glad that extending and expanding the credit was a top priority for Congress

Not sure who's on your side to secure jobs for Americans while making homes more affordable for you? Just "Ask a Builder."

For more information about NAHB's role on Capitol Hill e-mail joel@goldenrulebuilders.com or write to "Ask a Builder" at P.O. box 294, Catlett, VA 20119

Barkman is president of the Fauquier Chapter of The Northern Virginia Building Industry Association.

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