Thursday, November 5, 2009

TAX CREDIT EXTENSION JUST ABOUT A DONE DEAL

I've tried to stay away from "over-analyzing" all the rumors, lobbying and grandstanding about the proposed extension of the $8,000 first-time buyer tax credit. Either they will or they won't, has been my feeling, and beyond that I have just been focusing on business as usual.

Today, however, it looks like we have concrete news...

U.S. House of Representatives just voted 403 to 12 to extend the home buyer tax credit, expanding the parameters to include existing homeowners and not just first-time buyers. As it now stands, the federal tax credit will be extended through April 30, 2010, with a 60-day extension if a binding contract is in place prior to the deadline.

First-time home buyers will continue to be eligible for a tax credit of up to $8,000, while existing homeowners will be eligible for a reduced credit of up to $6,500. To qualify for the $6,500 credit, existing homeowners must have lived in their current residences for at least five years.

The bill also increases the qualifying income limits from $75,000 for single tax filers and $150,000 for joint filers to $125,000 and $225,000, respectively. The purchase price of the home is capped at $800,000 in both instances. Under additional provisions included in the bill, taxpayers can claim the credit on purchases completed in 2010 on their 2009 income tax returns.

The legislation maintains the provision that home buyers do not have to repay the credit provided the home remains their primary residence for 36 months after purchase, and waives this requirement for active duty military personnel who move due to a military order.

So round two of the tax credit looks like its going to benefit a new class of homebuyer - the five-year homeowner who has been looking to move up (or move down). This figures to give some more push to the $250,000 - $400,000 market, which has been flat, and so sellers in this price range should start thinking seriously about taking advantage of this coming wave of new buyers.