Debate Over Homebuyer Tax Credit Heats Up
Real estate agent Shellie Young shows a Miami home - Real estate agent Shellie Young (right) shows a Miami home to prospective buyer Gloria Arboleda earlier this month. Realtors say home sales have been on the rise, especially among first-time homebuyers because of a federal tax credit. (Joe Raedle / Getty Images)
If you're thinking of buying your first home, there are 8,000 good reasons to do it now.
As part of its effort to prop up the housing market, the federal government is offering an $8,000 tax credit to first-time buyers. But the offer is set to expire at the end of November.
"All the first-time homebuyers that have been procrastinating basically have to have their home under contract in the next 10 days to make sure they can close by the end of November," says Atlanta real estate agent Kerry Lucasse. "It's been a complete frenzy."
Lucasse figures she spent about 20 hours in her car this past weekend, shuttling eager buyers from one house to the next. Then she dropped by a house she'd just put on the market.
"I literally put the sign in the ground, and a realtor and their buyers came up. And I think we had an offer in four hours," she says.
Rising Sales
September was the busiest month Lucasse's office has had in seven years. Nationwide, pending home sales have been on the rise for seven months in a row, according to the National Association of Realtors. But just as auto sales dropped sharply once the government's Cash for Clunkers program ended, real estate pros are bracing for a letdown if the tax credit is allowed to sunset.
"I've heard a few other agents kind of chuckle and say, 'It's going to be a cold, dark winter,' " Lucasse says.
But not if lawmakers like Sen. Johnny Isakson (R-GA) can help it. Isakson — a former real estate executive himself — wants to extend the tax credit, increase its size and make it more widely available. The National Association of Realtors is backing that idea.
"We'd like to see it extended through 2010. In fact, we'd like to see it expanded to all buyers — not investors, not people buying second homes. But to people buying a home to live in," says NAR spokesman Walter Molony. "Certainly there's a cost to the Treasury in offering this. But the economic benefit — it gives you a pretty good bang for the buck."
Doubts About The Credit
But some people think the tax credit is a dud.
"Four out of 5 of the buyers were given $8,000 for doing something they were going to do anyway," says Andrew Jakabovics, associate director of housing and economics at the Center for American Progress, a Washington think tank closely aligned with the Obama administration. "While there are stimulative effects, it's a very costly credit."
Asked this week about the president's position on extending the tax credit, White House spokesman Robert Gibbs was noncommittal. Jakabovics believes the government should continue to prop up the housing market, but thinks it could do so in a more targeted way.
"That money could theoretically go towards foreclosure prevention and other housing market interventions that would be more effective," he says.
Even some real estate agents have doubts about just how long the government can keep giving handouts to every first-time homebuyer.
"Personally, I would love to have it extended," says Lucasse. "But I can't even imagine what the bill is at this point for the government."
The cost, so far, tops $11 billion.
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If you're thinking of buying your first home, there are 8,000 reasons to do it fast. Eight thousand is how many dollars you could get as a tax credit. The federal government has been trying to prop up the housing market by offering the credit, but the offer is set to expire at the end of next month.
As NPR's Scott Horsley reports, that deadline has sent homebuyers racing and has lawmakers thinking about extending the credit.
SCOTT HORSLEY: Here's something we've learned from government incentive programs this year: if you pay people to buy something, they will. And that's especially true when they think the payments are about to end. Just as a short-lived Cash for Clunkers Program brought people flocking to car lots this summer, the $8,000 homebuyer's credit has them lining up at open houses.
The credit's been available since the economic stimulus measure passed back in February, but Atlanta real estate agent Kerry Lucasse says it's the looming expiration of the credit that's really got shoppers moving.
Ms. KERRY LUCASSE (Real Estate Agent, Atlanta): All of the first-time homebuyers have sort of been procrastinating. They basically have to have their home under contract within the next probably 10 days in order to make sure they can close by the end of November. So it's been a complete frenzy.
HORSLEY: Lucasse figures she spent about 20 hours in her car this past weekend, shuttling eager clients from one house to the next.
Ms. LUCASSE: When I finished with that, I went and listed a home that was perfect for a first-time homebuyer and I literally put the sign in the ground. And a realtor and their buyers came up and we had an offer, I think, within four hours.
HORSLEY: Lucasse says September was the busiest month her office has had in seven years. Nationwide, pending home sales have been on the rise for seven months in a row. But just as auto sales dropped sharply once the Cash for Clunkers Program ended, real estate pros are bracing for a let down, if the tax credit is allowed to sunset.
Ms. LUCASSE: I've heard a few other agents kind of chuckle and say it's going to be a cold, dark winter.
(Soundbite of laughter)
HORSLEY: Not if some lawmakers like Georgia Senator Johnny Isakson can help it. Isakson, a former real estate executive himself, wants to extend the tax credit, make it bigger and more widely available. The National Association of Realtors is backing that idea. Spokesman Walter Maloney says it would help a housing market that is not yet self-sustaining.
Mr. WALTER MALONEY (Spokesman, National Association of Realtors): We'd like to see it extended through 2010. And in fact, we'd like to see it expanded to all buyers - not investors, not people buying second homes - but to people buying a home to live in. Certainly, there's a cost to the Treasury in offering this but the economic benefit, it gives you a pretty big bang for the buck.
HORSLEY: But some people think the tax credit is an $8,000 dud. Andrew Jakabovics is with the Center for American Progress, a think tank closely aligned with the Obama administration. He admits the tax credit brought some people off the sidelines into the housing market. But he says most of the people who got the money were already there.
Mr. ANDREW JAKABOVICS (Associate Director, Housing and Economics, Center for American Progress): Four out of five of the buyers were given $8,000 for doing something they were going to do anyway. So from that perspective, while there are stimulative effects, it's a very costly credit.
HORSLEY: Asked about the president's position on extending the tax credit this week, White House spokesman Robert Gibbs was noncommittal. Jakabovics believes the government should continue to prop up the housing market, but thinks it could do so in a more targeted way.
Mr. JAKABOVICS: That money could theoretically go towards foreclosure prevention and other housing market interventions, that would be more effective at stabilizing markets and things like that.
HORSLEY: Even real estate agent Kerry Lucasse has some doubts about just how long the government can keep giving handouts to every first-time homebuyer.
Ms. LUCASSE: Personally, I would love to have it extended. But I can't even imagine what the bill is at this point for the government.
HORSLEY: The cost so far tops $11 billion and counting.
Scott Horsley, NPR News, Washington. Transcript provided by NPR, Copyright National Public Radio.
