Has the Homebuyer Tax Credit Lost Its Luster?
by Tim Manni
We’ve been stirring the pot about another possible extension to the homebuyer tax credit (HBTC) for over a month now. With just 30 days left for homebuyers to shop, lock (in a rate) and sign a contract, it’s beyond crunch time.
While earlier today I was thinking that the chatter surrounding another possible extension of the HBTC was rather muted, the numerous articles I read on the subject shortly thereafter made it appear that I wasn’t entirely correct.
But while the amount of conversation may have picked up somewhat, it’s the tone of the conversation that has changed. It seems that on the month prior to the original tax credit’s expiration, trade groups, lawmakers and borrowers alike were all rallying for an extension; the sentiment was that the market depended on it.
This time seems different.
Meg Marco of The Consumerist wrote today that, “Long story short– everyone is scared to end the credit…”
I’m not so sure I agree.
Those who were originally opposed to the credit are advocating for its continuation. A lawmaker touted as one of the HBTC’s biggest advocates apparently is showing no signs of pushing for it to continue past June.
And this is absolutely, positively your last chance to claim the credit. (Probably.) So don’t wait, thinking the credit will be extended for a third time.
There is little sentiment for continuing this program, especially because many consider the latest iteration’s results to be disappointing. Even the Senate’s biggest proponent of the homebuyer tax credit, Johnny Isakson, R-Ga., is ready to let it end.
“He has no plans to introduce legislation to extend the credit,” said Isakson’s spokeswoman. “Part of the benefit of the tax credit was the urgency its sun-setting generated.”
Arguments for extending the tax credit a second time are just beginning. Robert Shiller, a professor of economics at Yale and co-developer of the Standard & Poor’s/Case-Shiller housing price index, is an early advocate. He thinks the credit was a bad idea that nevertheless the market cannot do without.
“You don’t make drug addicts go cold turkey,” Mr. Shiller said. “The credit interferes with the market in an arbitrary way, but ending it now would be psychologically powerful. People will be in a bad mood about buying a house.” He advocates phasing it out gradually.
Beyond the flip-floppers, the converts and the indifferent, a big problem is that we have no concrete way to gauge just how much the tax credit factors into would-be buyers’ decisions over whether or not to buy at the current time. Judging just by some of the recent comments we’ve received on this blog, an extension would do a lot of good. (A poll from the National Association of Realtors [NAR] back in November 2009 found that 94% of homebuyers would have bought their home regardless of the HBTC. Earlier this month the NAR said that the HBTC hasn’t been a success so far this year.)
Help us get a sense of how important another extension of the HBTC is to you — cast your vote on our poll below:
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Discouraging.
