The Senate has agreed on a compromise measure to extend and expand the popular home buyer's tax credit, which is set to expire at the end of November, said two leading proponents.
Senators Chris Dodd (D-Conn.), who chairs the Banking, Housing and Urban Affairs Committee, and Johnny Isakson (R. Ga.), a former real estate professional, Wednesday laid out terms of the deal.
It essentially splits the difference between their proposal and a less generous one advanced by Majority Leader Harry Reid of Nevada, which leads the nation in foreclosures, and Sen. Max Baucus (D-Mont.), who heads the Senate's finance committee.
The compromise measure expands the tax credit to non first-time buyers and also raises income ceilings, while also extending the deadline to to April 30, 2010.
Under the new proposal, people who have lived in a primary residence for five consecutive years would be eligible for a $6,500 credit when purchasing a new property.
Incomes limits will be raised to $125,000 for individuals and $225,000 for couples, vs. $75,000 and $150,000 previously.
The maximum house value rises to $800,000.
The development comes amid recent signs that housing activity is slowing, perhaps partly because potential buyers are uncertain they can close a deal in time to qualify for the $8,000 credit.
Popularity aside, the tax credit is still not a sure thing. Its fate is connected to a battle over amendments to a more important bill providing additional unemployment benefits.
The home buyer credit is one of several amendments likely to be attached to a bill that would extend jobless benefits for all workers by 14 weeks with an additional six weeks of coverage those living in states with unemployment rates over 8.5 percent. (Congress passed a similar measure earlier this year.)
The decision to apply the program to repeat buyers and those with higher incomes is notable. Supporters say the original plan was only helping lower-income buyers and thus creating a limited housing recovery.
A Nixon-era program, for instance, applied to all buyers and owner-occupied residential properties and is thought to have helped new construction along with the existing home market.
The Obama administration earlier today urged the Senate to extend the housing credit, but it is unclear if it now favors expanded eligibility.
The tax credit has been a major factor in a home sales bump that started in the spring. A national realtors group has forecast the credit would lead to about a 350,000 sales that would not have ordinarily taken place. About 2 million people were expected to take advantage of the program.
Mortgage rates remain near historic lows and housing affordability is the best in years, as sellers drop prices to attract buyers.
Isakson said it would be the "last extension."