Clock Is Ticking for First-Home Buyers
Friday, September 25, 2009
First-time home buyers are scrambling to take advantage of an $8,000 tax credit set to expire in coming weeks, while Congress considers whether to extend the program or risk removing what may be one of the few supports underpinning the housing market.
Data released Thursday show how delicate the housing market is these days. Sales of existing homes unexpectedly dipped 2.7 percent in August from July after four months of steady gains, according to the National Association of Realtors.
The tax credit was designed to help jump-start the housing market, and it has been credited by the real estate industry for boosting sales. Roughly 1.4 million people took advantage of the program since its enactment early last year, according to the IRS, and more are rushing to do the same.
Given that it can take more than a month to close on a home after a contract is accepted, prospective buyers are running out of time. The program ends Nov. 30.
Robbie Pettit has made offers on six Prince William County homes in the past two months in a desperate effort to beat the clock. But each time, he's been outbid by competing house hunters equally eager to cash in on the program, he said.
"I'm praying for an extension of this credit, praying," said Pettit, 27, who is living with his wife, three children and their dog in a cramped, rented townhouse.
Lawmakers have offered nearly two dozen bills to extend the tax credit or expand it. A bipartisan group that includes Senate Majority Leader Harry M. Reid (D-Nev.), have offered a measure that would maintain the tax credit in its current form until June.
But vigorous lobbying by the real estate industry to keep the credit in place has yielded no action on any of the bills, and the Obama administration is mum on its position.
Supporters of the tax credit argue that it has succeeded in energizing buyers and helping clear a glut of lower-priced homes, including foreclosed properties, that are dragging down home values.
But critics, including some policy analysts at Washington think tanks, balk at the program's projected $15 billion price tag, and they do not want taxpayers to be further burdened. These dissenters attribute the previous pickup in sales to plunging home prices and record-low interest rates. The tax credit, they say, is nothing more than a freebie for people who were going to buy regardless.
Marisa Sandler and her fiance expect to close on a condominium in Friendship Heights on Friday. They plan to use the tax credit to invest in the stock market or pay down their mortgage principal.
"We probably would have bought without the tax credit, but it was the extra push that made us do it this year," she said.