Realty Check

Home Buyer Tax Credit Gains Steam

Susan Walsh

I was on the fence for a while as to whether Congress would extend the $8000 and whether the Administration would stand behind that, but I'm getting some clues that have pushed me over the side.

I think it may happen.

I've been asking Administration types for weeks now, one "on background" who said, "There are a lot of ideas out there for what to do with the extension of the home buyer credit and other credits, and those issues are not yet finalized from our perspective internally." So yes, he punted it.

I asked FHA commissioner David Stevens in an interview. He said, "We're looking at the first time home buyer tax credit. It's had an impact. It's being measured. The administration will come out with a recommendation and their position on where we stand on the tax credit. We'll support that position." Same kick.

An industry insider I know who went to a meeting with Treasury types this week said she came away feeling like "it was going to happen."

But yesterday Maria Bartiromo did an interview with Treasury Secretary Geithner, and while he didn't come right out and endorse an extension, he didn't punt it either; in fact, he hinted it would happen:

BARTIROMO: A lot of people say, well, what happens when the stimulus is gone?

You look at what happened with the cash for clunkers deal. We went from horrible to great to horrible again. The first-time homebuyer credit. So what happens when the stimulus is gone?

Sec. GEITHNER: ... We're not going to make the mistake many countries made in the past of putting the brakes on too early and creating risk that we have a, you know, weaker recovery with even higher levels of unemployment going forward.

And then later in the interview:

Sec. GEITHNER: The Congress is carefully looking at a range of important things, like setting unemployment insurance, other types of programs that are critical to recovery...

BARTIROMO: A good case for a second stimulus?

Sec. GEITHNER: No, for what I just said, which is looking at a set of programs like unemployment insurance, other sets of things that have--that are set to expire. And there's a good case for extending them. And I think a lot of support fundamentally for doing it.

I think the "that are set to expire" is a pretty good indication of what he's talking about.

Last week Congress' Joint Committee on Taxation put out a score (financial projection) of a potential extension of the credit.

It estimated the cost at $16.7 billion to extend it through June 2010 and expand it to all home buyers, not just first timers. Its estimate also figures in raising the income cap for eligibility to $150,000 for individuals and $300,000 for joint filers.

Concept Capital's Washington Research Group says this "strongly suggests that a mere extension of the program will be much less and refutes whispers in Washington that an extension alone could cost more than $15 billion. The Group also notes, "This amendment offers room for Senate Democrats to negotiate with House Democrats. In conference, Senate Democrats could agree to drop the expansion in exchange for House support of an extension of the credit until June 30, 2010. We continue to believe this is the most likely outcome."

Oh, and by the way, the House Ways and Means Oversight Subcommittee is holding a hearing next week on fraud involving the first time home buyer tax credit.

Questions?  Comments?