The question I am hearing more than any other right now is, "Will the $8,000 first time buyer tax credit be extended or expanded after it expires on November 30?"Up until a few days ago, I was pretty confident it would be extended. Now I am not so sure.
The Denver Post ran an editorial this morning in opposition to extending the tax credit. One huge reason: the original projected cost of $8 billion has nearly doubled, to $15 billion and counting.
Interest groups like the National Association of Realtors and the National Association of Home Builders (as well as ancillary beneficiaries like Lowes, Home Depot, etc.) are lobbying not only for an extension of the credit, but an expansion to $15,000, made available to all home buyers in 2010. That proposal comes with an estimated price tax of $100 billion, or an additional one-year tax burden of about $1,200 for every household in America.
I have felt all along that the lobbying for an expansion of the credit was simply a negotiating ploy to preserve the existing credit for a few months longer. That still could happen.
But it's no sure thing. And continuing down this road runs the risk of taking us right back to the place where this economic meltdown started - people buying homes with short term perspective driven first by easy credit, and now by an $8,000 check from the government.
Here's a thought: if keeping the housing market afloat in the midst of the worst economy in 70 years is a priority, why don't we cut the credit in half for 2010, and offer $4,000 to first-time buyers? Don't unplug the stimulus all the way, but let's recognize we can't subsidize all areas of the economy forever.
Here in Colorado, we are far better poised to deal with an elimination of the tax credit than the "free-falling" states like California, Arizona and Nevada. Truth is, our market was getting better before the national economy came unravelled, and it's likely to bounce back before many other areas of the country.
Although I have helped a lot of buyers take advantage of the $8,000 first-time buyer tax credit, we shouldn't be dependent on it, nor should we count on it being around indefinitely. Reducing or eliminating the credit is probably better for the long term health of our housing market than expanding or extending it.
