NMN: “White House Mum on Extending Tax Credit”by Tim Manni
According to National Mortgage News (NMN), the White House is still “mum” on whether or not lawmakers will vote to extend or expand the $8,000 first-time homebuyer tax credit.
If you’re still unsure about taking advantage of the credit, the clock is ticking. All the way back in August we warned borrowers that, with the November 30 deadline fast approaching, they needed to act A.S.A.P. “The mortgage process usually takes anywhere between 45 and 60 days,” advises HSH VP Keith Gumbinger.”
Over the last two days White House Press Secretary Robert Gibbs has addressed reporters’ questions regarding the credit’s extension. Yesterday, Gibbs confirmed that a decision hasn’t yet been made, and, according to NMN, Gibbs had the same to say during this morning’s briefing.
White House press secretary Robert Gibbs said the tax credit has “helped the economy” and an extension is under consideration as the President looks for ways to create more jobs. “Obviously, there has been quite a bit of success” in the program, Mr. Gibbs told reporters. Housing and mortgage industry groups are urging Congress to extend the credit for another year. Meanwhile, the National Association of Home Builders wants to expand the tax credit to all home buyers.
The House Ways and Means Committee is expected to begin work on a tax credit extension bill in a few weeks. Due to the costs of the program and budget constraints, some insiders are betting Congress will go along with a six-month extension.
A few weeks ago we noted that it would make sense for Congress to extend the homebuyer’s tax credit to coincide with the Fed’s extension of their mortgage-backed securities purchase program:
The $8,000 first-time homebuyer tax credit was an incentive to get potential buyers into the market. The Fed’s MBS purchase program makes those potential transactions more possible and affordable. The two programs have contributed to lower mortgage rates and provided a much-needed boost for home sales during an anemic housing market. For one to expire approximately four months before the other could really throw off the market’s improving dynamic. Furthermore, the Fed’s ongoing stance that markets are improving, but not quite ready to branch out on their own, only further serves to bolster this theory.
Yet, not all market analysts have the same opinion regarding the effectiveness of the tax credit. Industry professionals like economist Paul Dales feel that the impact of the tax credit is a bit “overstated.” While the National Association of Realtors claims that the tax credit has accounted for about half the year’s increase in home sales, Dales argues that the credit is responsible for far less:
[Dales] writes that the tax credit’s expiration isn’t likely to bring the housing market’s recovery to a halt, though it could slow recovery.
Low mortgage rates and prices that have fallen relative to incomes “suggest that the recovery will be sustained once these schemes expire,” writes Mr. Dales in a Tuesday note. The National Association of Realtors estimates that around 350,000 sales, or nearly half of the 710,000 increase in home sales since January, are directly attributable to the tax credit. But Mr. Dales says that the impact is probably closer to 225,000 home sales, or 30% of the increase since January.
We’ll keep you posted of any new talks in terms of new developments in Washington regarding the extension of the $8,000 first-time homebuyer tax credit.