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Home Buyer Tax Credit's Course

More confusion today about what's up with the first time home buyer tax credit extension.

Sen. Bill Nelson (D-FL) made a comment as he boarded AF1 today that "We should be able to extend that later this week."

He's a member of the Senate Finance Committee, which is working on the phase-out plan I reported Friday .

Then supposedly the market gets spooked because Bloomberg reports a story that ISI Group says the tax credit would not be extended even though it then goes on to explain it would be phased out.

Read people, read!

Anyway, here's the most likely scenario, I believe, and I've been told by my sources, from Concept Capital's Washington Research Group:

Legislative Course

The key vote will be Tuesday – as we discuss in today’s calendar note – as Senators need to approve a motion to proceed to the Unemployment Insurance bill. We believe there are enough votes to pass the motion, which means the Senate will then start considering amendments. Sens. Isakson and Dodd will then offer their amendment to extend the tax credit and open it to all buyers and to raise the income cap to $300,000 adjusted gross income for joint filers from the $150,000 AGI cap now in effect.

That bill would cost nearly $17 billion, which is why we expect the amendment to be defeated.

Then Senate Majority Leader Reid and Senate Finance Committee Chairman Baucus will offer the amendment to extend the homebuyer tax credit through 2010, though it would phase out starting April 1 by $2,000 per quarter. This also would include a modified expansion of net operating loss carrybacks and be paid for with a delay in the worldwide interest allocation rules. Senators will offer many other unrelated amendments. We would expect those to be defeated.

The goal is then to pass this bill in the Senate on Wednesday so the House may approve it Thursday.

Will This Happen

This is certainly a chaotic process but our conversations continue to lead us to believe that there is a window for success this week. Our view remains unchanged since Thursday that the Reid phase-out plan is the one that will be adopted. If it cannot get done this week, we expect lawmakers to return to it in November.

Questions? Comments? RealtyCheck@cnbc.com

  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.

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