The proposal was simple and necessary: Extend the closing date for the home buyer tax credit from June 30th to Sept. 30th — not the tax credit itself, which required buyers to sign a contract by April 30th, just the closing date.
Anybody who has ventured into the real estate market in the past year knows that tighter lending standards, new appraisal rules and general banking backlogs are making a two month contract-to-closing period very difficult.
This week the chief economist for the National Association of Realtors said 25 to 30 percent of the buyers who signed in April will not get to closing by June 30th; that translates into roughly 180,000 home purchases. The credit is $8000 for first time buyers and $6500 for repeat buyers. This is not to say that all those buyers will pull out of the deals, but they will lose the incentive that may have gotten them to the table in the first place.
The closing date extension was added to a tax extenders bill backed by Democrats in the Senate. That bill has failed three times already, in the face of Republican opposition to adding to the federal deficit.
It ain't over 'til it's over
Yes, it's dead now, but Senate sources say they are looking into "other options." The point is they can add it to whatever they want and try passing it again and making it retroactive. But June 30th is still the current deadline, and that means an awful lot of buyers will not get what the government promised, and many will likely pull out of deals.
I did speak to some builder types, and they tell me that many home builders put a closing guarantee into the contracts, so those buyers may be protected. The builders may have to pony up some kind of $8,000 upgrade, or the actual cash, to keep the buyers at the table, which of course I'm sure they're thrilled to give up out of their already bleeding builder bank accounts.
It's just so typical.
Here you have a federal tax break, designed to stimulate a housing market in total freefall, but it somehow fails to recognize just how bad the current market conditions are.
The housing industry spent millions and millions of dollars lobbying Congress for said stimulus and its extension. So how is it that nobody mentioned that in today's market it can often take longer than 8 weeks to close on a house?