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March 30th, 2010

Has the Homebuyer Tax Credit Lost Its Luster?

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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.

From CNNMoney.com:

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.”

From The New York Times:

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:

Should the homebuyer tax credit be extended again?

View Results

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15 Responses to “Has the Homebuyer Tax Credit Lost Its Luster?”

  1. Mickey Herley Says: March 31st, 2010 at 1:11 pm

    My wife and I recently got married. We both have good jobs and have been saving with the goal being to purchase a home as the next step in our lives. Since it is a buyers market, we were able to be very particular about the home in which we could see ourselves living. The tax credit was a persuasive tool in getting us started. I would say that was the extra motivation to get out and begin looking. We knew of the time constraints but weren’t going to let that be the driving force as we wanted to be sure that we found a property that suited our needs. Much to our suprise the prospecting didn’t take as long as we anticipated. As a result, the tax credit went from motivation to an added bonus on the puchase. We have a signed agreement and close on 6/22. The long-term effectiveness of something like this will be judged in due time. However, I can tell you from first hand experience that this has been a success with my wife and I.

  2. Tim Manni Says: March 31st, 2010 at 3:07 pm

    Hey Wickey,

    Thanks for commenting. First off, glad to hear your buying experience was both a successful and seemingly non-frustrating one — we’ve read a lot of horror stories.

    I think you and your wife had the right mentality about the tax credit, and utilized it as it was designed to be used: “the tax credit went from motivation to an added bonus on the purchase.” The credit neither outright influenced your decision of when you wanted to buy or what type of home you could afford.

    Best of luck in your new home. Feel free to comment again soon. Make sure you cast your vote on our poll!

    Thanks,
    Tim

  3. PakullaLending (Nick Pakulla) Says: April 1st, 2010 at 2:12 pm

    RT @HSHassociates: 79% of our readers say they’re depending on another extension of the Homebuyer Tax Credit http://bit.ly/91ADcR Vote too!

  4. Larry Gamel Says: April 1st, 2010 at 11:08 pm

    As a Realtor who list HUD homes I am seeing a more normal market since the extension compared to the chaos that ensued late last year when the original deadline approached. My biggest issue was when folks were offering $20-$30k over asking price just to ensure they placed the home under contract. That is insane. But as far as the credit goes if cheap interest rates combined with undervalued homes doesn’t give motivation, nothing will. Not even a credit.

    Larry

  5. Tim Manni Says: April 2nd, 2010 at 9:21 am

    Hey Larry,

    “…if cheap interest rates combined with undervalued homes doesn’t give motivation, nothing will”: Couldn’t agree more Larry. It’s good to hear that things are returning to normal. In your opinion, should the credit be extended again?

    Thanks,
    Tim

  6. judy Says: April 5th, 2010 at 10:05 am

    Short Sales are causing the problem!.
    The banks already had PMI(private mortgage insurance)
    WHY do the home sellers have to suffer?
    Even if you do try the Short Sale, The banks wait for months to get the best “deal” (asking price).
    AND then they come after you for the remaining Purchase Price you signed the dotted line on.
    Still the Short Sales are the problem.
    The Bail OUT should have covered the PMI and No Short Sales should be allowed.
    Period.

  7. Tim Manni Says: April 5th, 2010 at 12:09 pm

    Thanks for commenting Judy. “WHY do the home sellers have to suffer?”: A) I don’t think “suffering” is the right word, and B) these are borrowers who defaulted on their loans. Since borrowers are doing lenders “a favor” by selling the home, lenders tend to be more willing not to mark up credit reports and such (but not always). Yet, I do agree, the short sale process is far from seamless.

    Thanks again for sharing your opinions, they’re always welcomed,
    Tim

  8. Ryan Says: April 6th, 2010 at 2:32 pm

    Please extend the tax credit — some of us had major work on our credit reports, and save up hard cash money to put into a home — This Tax credit is the boost we all need when buying our first home…….
    Boston MA

  9. Tim Manni Says: April 6th, 2010 at 2:55 pm

    Hey Ryan,

    Thanks for commenting — hope you voted on the poll!

    We actually just wrote another post on the tax credit, CLICK HERE to check it out.

    Thanks again,
    Tim

  10. Kelley C Says: April 6th, 2010 at 9:38 pm

    Want to buy but the tax credit is not newlywed friendly. Singgle, I would have qualified for the $6500 crdit, he would have qualified for the $8000. Together less than 5 years, we qualify for 0. :( Discouraging.

  11. derrekmuchigan Says: April 7th, 2010 at 2:58 am

    Extend at least through summer. We wanted to by last winter, but nothing was available in our price range. Spent the last 6 months designing a home that will start going up in a couple weeks. We have a sales contract as well as the HUD 1, but enough time to meet the June 30th deadline. My wife and i are very upset, as we would not have thought of doing this without the credit!

  12. Tim Manni Says: April 7th, 2010 at 9:28 am

    Derrek,

    I think a summer extension would make sense too. It sounds like for you and your wife that the tax credit was a real motivation. Well, be sure to check back in with us — we’ll keep you up to date.

    Hope you voted on our poll! Thanks for commenting,
    Tim

  13. Tim Manni Says: April 7th, 2010 at 9:33 am

    Kelley,

    I would make sure you look into this more before giving up. Be sure to check out this link from the IRS.gov, it provides quite a bit of scenarios like yours, then determines if you qualify, check it out:

    http://www.irs.gov/newsroom/article/0,,id=206294,00.html

    Hope you voted on our poll! Thanks for commenting,
    Tim

  14. Steve Says: April 7th, 2010 at 8:10 pm

    For the sole reason of short sale delays, at least the June 30 deadline should be extended. My wife and I have been waiting 5 months for a short sale approval, so we are within the April 30 contract signing deadline, but could lose the credit if the short sale approval continues to be delayed (a real possibility). Imagine people who entered into contracts within the past couple of months? They have little hope of gaining the credit. In this regard, buyers should not have to bear the burden of a dysfunctional short sale process. This is particularly important since a very high number of lower priced properties (particularly condos) are short sales in my area. I wrote my representatives about this very issue.

  15. Tim Manni Says: April 8th, 2010 at 9:32 am

    Steve,

    Hopefully HAFA (which began Monday) will help to speed up the short sale process.

    Steve, are you buying a home that’s being sold via a short sale, or is your property the one that’s in the short sale? I think our readers would be very interested in hearing more about the process.

    Let me know, thanks for commenting,
    Tim

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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