The Economy Project
Mon September 21, 2009
First Time Home Buyers Rush to Buy Before Tax Credit Deadline
By Lisa Autry
Bowling Green, Ky – First time home buyers across the nation will be scrambling in the next few weeks to take advantage of a government tax credit before it expires.
The deadline for receiving the $8,000 credit isn't until December, but experts say, homes should be under contract much sooner in order to still qualify.
A December 1 deadline may seem far off, but lining up financing and doing home inspections and actually closing can take weeks, if not months. while the deadline is nearly eleven weeks away, offers need to be made now, says Bowling Green realtor Alan Read.
"We feel like you need to have the house on contract by October 15 because that's giving six weeks until the deadline hits," says Read. "And especially, if it's a first time buyer, perhaps they're going through FHA or a government program, which can sometimes take a little bit longer, you don't want to cut it so fine that you miss an $8,000 credit by two or three days. "
The focus of the credit has been traditional starter homes. The government's $8,000 offer has a lot of younger Americans rushing to get into the market at a lower time.
"We started seeing it two or three weeks ago," Read says. "Most everybody is trying to play it safe and get in in plenty of time."
Given the rush to get homes under contract, realtors and home builders are pushing congress to extend the program past the December deadline.
"The statistics would indicate that we have had more sales because of this than we would have had without it," says Read. "We've had imbalance in inventory and it's helping to clear out inventory which is a good thing for the local economy also."
Some in the industry aren't convinced an extension is the right thing to do, arguing that sooner or later, the housing market should get used to natural levels of demand.
But still, Read says the first time home buyer credit has been a great economic stimulus for the housing industry.
"Certainly, it's not something you want to have forever but we see enormous benefits in having that extended at least a few months," he says.
Until Americans file their income tax returns in April, there's no way to know for certain how many people took advantage of the tax credit. But the National Association of Realtors estimates that more than a million first time home buyers had scooped up the offer as of August 31st, far exceeding the group's expectations.
The government program defines a first time buyer as someone who has not bought a home in the last three years. The tax credit is cash the buyer doesn't have to pay back but eligibility is determined by income. The income limit for single taxpayers is $75,000, the limit is $150,000 for married couples filing a joint return.
The buyer must live in the home for at least three years and the cost of the home must be at least $80,000.