John Rebchook is a former Rocky Mountain News reporter with more than 30 years of experience in writing and communications... Much to the relief of Denver-area Realtors, and other real estate industry officials across the country, the tax credit for home buyers will be extended, and expanded to include people typically in the move-up market.
In addition to the tax credit up to $8,000 for first-time home buyers, which was currently is set to end at the end of this month, a new plan working its way for Congress would expand the program to include a $6,500 tax credit for those who have lived in their home for at least five years and are buying another home.
President Obama is expected to sign the new legislation on Friday. It was approved by the House today and the Senate on Wednesday.
“That targets the move-up buyer,” said Tom Cryer, a broker with the Kentwood Co.
Independent broker Gary Bauer said the tax credit bills working their way through Congress will help.
“From my perspective, this is going to continue to drive the market, not only for first-time home buyers, but for what I’m calling the move-buyers,” Bauer said. “People who already live in homes will be moving up, down-sizing or going sideways. Whatever category they fit into, if they feel comfortable enough to sell their home and buy another one, it will be great for the market – and you can do it and get an extra $6,500!”
To qualify for the credits, both the first-time and current owners, would need to sign a purchase agreement by April 30, 2010 and close by June 30.
Through August, about 1.4 million first-time home buyers have taken advantage of the program and about 325,000 of them would not have bought the home without the credit, according to the National Association of Realtors. Critics of the program, however, call it a gift to home buyers, who would have bought a home even without it.
The credit is available for buying principal homes costing $800,000 or less. It would be phased out for prospective buyers with annual incomes above $125,000 and for joint filers with incomes above $225,000.
The credit would be extended an additional year, until June 30, 2011, for members of the military serving outside the United States for at least 90 days.
Cryer said the timing is good for the likely extension of the tax credit, when the notion is fresh on the minds of perspective home buyers.
“It keeps it from getting stale,” Cryer said.
He has seen it work first-hand.
“I had a closing yesterday on a property at $204,000 and the buyer was a first-time buyer,” Cryer said. “Definitely, the buyer was pursuing the closing to get it over with before the tax credit expired. But there are always procrastinators. And there are people who just can’t find the home that they want, and they aren’t going to be pressured to buy a home because of the tax credit. I have one client who is committed to find exactly the home she wants, and she will not let the credit influence her decision. ”
Cryer said opening up a tax credit to existing homeowners will help stabilize the move-up market, by attracting more buyers at higher-price points.
“Until we get the move-up buyer back into the market, we’re not going to see a healthy return in all price ranges,” Cryer said.
He said someone who bought a $250,000 home in Denver five years ago, “probably has built up a little bit of equity, and if they are comfortable with their job circumstance, they could take advantage of this program,” he said. “Slowly but surely, we are building the confidence in the market that forms a bottom. I know I keep saying this, but it really feels like we are back where we were in 1989,” when the Denver market was about two years away from clearly being on the rebound.
“People are going to look back at this time and say, “We should have done something when rates were low, prices were low and we had the tax credits.”
Contact John Rebchook at JRCHOOK@gmail.com or 303-945-6865.
