Posted on Sunday, November 29th, 2009
The $8000 tax credit for first time buyers was scheduled to expire
on December 1, 2009. This would have hurt an already slow real estate
market. Now the tax credit has been extended and improved!
To claim the credit, homebuyers must sign a contract by April 30,
2010 and close by June 30, 2010. For the first time, many current
homeowners will also be able to use the credit: In addition to
extending the $8000 credit for first time buyers, there is now a $6500
credit for owners who have owned and occupied a residence for at least
five out of the last eight years. The income limits were also raised.
Single buyers can now earn up to $125,000 and a married couple can earn
up to $225,000.
The new tax credit will help our market in more ways than the old
credit did. By limiting the tax credit to first time buyers, the old
credit didn't do much to help sell middle to upper bracket homes. In
my work as a Saint Paul area Realtor, most of my first time buyers
purchase more moderate starter homes. It is not surprising that in
2009, entry level homes sold much better than more expensive homes. By
increasing the income guidelines and expanding the eligibility
guidelines, there will be more buyers for homes in a variety of price
I had expected the old credit to be more effective. Throughout most
of my 22 year career selling St. Paul homes, whenever I sold a starter
home to some first time buyers, it initiated a whole chain of events:
The sellers would buy another home, and the next sellers would buy
another home, etc. But recently, there have been many foreclosed
properties for sale. Because of this, many of the purchases made by my
first time buyers didn't help anybody else buy a new home.
Many of my conservative friends hold a dim view of the tax credit.
They are especially upset with expanding the credit to more affluent
people who already own a home. In their view, these individuals are
perfectly capable of buying a home without any help from the
government. They believe that the credit will simply go to people who
were going to buy a home anyway. But I have had a different experience
over the last 2 years. I have gone on listing appointments to many
beautiful homes in desirable neighborhoods. A casual passerby would
assume that nobody in that neighborhood could possibly need any help.
While it is true that most of them make an income that will allow them
to purchase another home, many of them can't find buyers for their own
homes. I have heard hundreds of stories of job opportunities that were
missed because people couldn't sell their homes and relocate. I
believe that the effectiveness of the current tax credit will be
measured in what it does to help people sell their homes and not just
in what it does to help people buy homes.