As you all know from my recent blog post, I have been watching with great interest the discussion and debate over an extension of the First Time Homebuyer Tax Credit. The credit, which has had so much impact locally in revving up our third quarter sales and values, will be extended to include move-up homebuyers as well.
Following the Senate’s favorable vote yesterday, the U.S. House of Representatives just voted 403 to 12 to extend the home buyer tax credit, expanding the parameters to include existing homeowners and not just first-time buyers. The Senate cleared the way to pass the extension and expansion of the tax credit for homebuyers by an 85 to 2 roll call vote. These actions it virtually certain that the legislation will reach President Obama for his signature this week.
The homebuyer tax credit was due to expire at the end of November. As it now stands, the federal tax credit will be extended through April 30, 2010, with a 60-day extension if a binding contract is in place prior to the deadline. First-time home buyers will continue to be eligible for a tax credit of up to $8,000, while existing homeowners will be eligible for a reduced credit of up to $6,500. To qualify for the $6,500 credit, existing homeowners must have lived in their current residences for at least five years. The bill also increases the qualifying income limits from $75,000 for single tax filers and $150,000 for joint filers to $125,000 and $225,000, respectively. The purchase price of the home is capped at $800,000 in both instances.
Under additional provisions included in the bill, taxpayers can claim the credit on purchases completed in 2010 on their 2009 income tax returns. The legislation maintains the provision that home buyers do not have to repay the credit provided the home remains their primary residence for 36 months after purchase, and waives this requirement for active duty military personnel who move due to a military order.
For homebuyers across the country, the expanded tax credit would allow more people to qualify for the credit. While two-thirds of American families own their own home, and most earn less than the income limits that have been established within the extension, more buyers may be eligible. Move-up buyers don’t have to sell their current home to qualify for the new credit, but the money cannot be used to buy a vacation home. The credit is only for the purchase of a primary residence. In expanding the tax credit, the intent is to assist first-time home buyers, as well as homeowners looking to move up to a new home, but would exclude from the credit speculators who may have recently purchased a home intending to flip it for profit.
The tax credit has fired-up the housing market, driving existing home sales to the highest level in over two years.
It’s a great time to purchase a home in Southern California. Prices are lower then they have been in over 7 years and interest rates are at historic lows. You can purchase a home with as little as 3.5% down and pay less then you may be paying in rent.