Home Tax Credit Closing Extension Still Lives
Today is the closing deadline for home buyers to get their $8000 tax creditif they're first timers and $6500 if they're repeat buyers. This is if they signed contracts by April 30th. Previous efforts to extend the deadline failed, but a new move is afoot that may just have the backing.
Under pressure from the powerful Realtors lobby, which claims a full third of eligible buyers, or about 180,000, won't be able to make today's deadline, the House of Representatives late yesterday brought up a stand-alone billto extend just the closing deadline to October 1.
It passed 409 to 5.
House Speaker Nancy Pelosi threw out a quick statement, saying, "...our housing market will be strengthened as a result."
The Senate is a tougher beast, but Democrats there are trying to push the extension through by attaching it to a stalled bill extending unemployment benefits. This is a bit trickier, as the unemployment part has some sticky spending elements that I won't get into here.
Obviously they're not going to get it all done today, but it would be retroactive, so buyers would be covered. Will some deals fall through? Probably. Have some already? Probably. Is the extension necessary? I'm not so sure.
When I blogged about the extension being dead last week, a lot of you responded, "Good riddance!" Enough buyers got the benefit, and in hindsight, it didn't really jumpstart the housing market the way we had hoped. Yes, it got rid of some unwanted inventory by pushing buyers off the fence in March and April, but the falloff has been huge so far.
Sales of new construction plummeted in May (that data set is based on contracts signed). Tomorrow we get the report from Realtors on Pending Home Sales (also contracts signed in May), and the expectation is for a plunge. We already have plenty of anecdotal information from Realtors saying that traffic ground to a halt after the credit expired.
And then there's just the additional opportunity for fraud.
We've already heard about the 1295 prison inmates who supposedly took advantage of a $9 million chunk of the tax credit.
241 of them were serving life sentences, so not a lot of need for new digs there. Over 10 thousand taxpayers, according to the Treasury's inspector general, got the tax credit for buying the same homes that others were already using. I'm also told by some folks on the street that there's been an awful lot of fraudulent backdating, to get some buyers who missed the deadline back under the wire.
The argument for the extension has to do largely with the slower-than-ever mortgage process and a large volume of short sales, which also take longer to process.
It's fair and valid, but it's also just a fact of the market.
I'm not so sure I believe the 180,000 number that the Realtors are putting out (no offense) and even they admit that not all of those 180,000 deals would fall through without the credit.
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