Last evening, the Senate passed the Unemployment Compensation Extension Act (H.R. 3548), a bill mostly aimed at extending unemployment benefits. The bill also included the extension on the $8000 first-time homebuyers tax credit.
Under the bill, first-time home buyers will be able to claim the $8,000 tax credit as long as they close on the home by June 30.
The plan will also make those who buy a new primary residence eligible to claim a $6,500 credit as long as they owned their current home for at least five consecutive years in the previous eight years.
The bill limits the purchase price of the home to $800,000 and implements income caps. Singles who make more than $125,000 annually and couples who make more than $225,000 will not be eligible for the program.
The bill is estimated to cost $10 billion.
No word yet on whether the bill incorporates any of the oversight recommendations suggested a couple of weeks ago by the Treasury Department Inspector General or the IRS, in order to stem the river of fraud that has already occurred in the program.
And there is still considerable worry that increased intervention in the housing market may be forestalling the inevitable, a Cash-for-Clunkers-type post tax credit expiration crash:
But these artificial props won’t last forever and may have created a false bottom in the market. “The risk of renewed home-price declines remains significant,” Goldman economist Alec Phillips writes in the report, “and our working assumption is a further 5% to 10% decline by mid-2010.”
Federal government policies encouraging loan mods have reduced the supply of homes on the market temporarily because it takes months for loan servicers (the firms that collect mortgage payments) to figure out which borrowers qualify. Some states have added their own restrictions on foreclosures that drag out the process further. In many cases, borrowers who get loan mods will default again within a year or so, meaning the problem has been delayed rather than solved. That means there is a large but impossible-to-measure “shadow” inventory of homes that eventually will hit the market.
Filed under: Appropriations, Bailouts, Budget, Corruption, Deficit, Scandal, Taxes, Waste
I’ve been engaged in taxations for longer then I care to acknowledge, both on the individualized side (all my working life!!) and from a legal stand since satisfying the bar and following tax law. I’ve offered a lot of advice and corrected a lot of wrongs, and I must say that what you’ve posted makes impeccable sense. Please carry on the good work – the more individuals know the better they’ll be outfitted to handle with the tax man, and that’s what it’s all about.