The Senate voted on Wednesday of last week to extend the $8000 Tax Credit for first time home-buyers through the first 6 months of next year as part of a broader bill to extend unemployment benefits. For the first time, the tax credit program will also extend to homeowners who currently own a home and wish to purchase a new primary residence. On Thursday, the bill reached the House and easily passed there as well, paving the way for President Obama to sign it into law. On Friday, President Obama signed the bill making it official.
Some key points of this bill are:
1.] For first-time homebuyers: They have until May 1st of 2010 to go into contract and they must close escrow by June 30th of 2010. The new law raises the annual income for a single person to $125,000. For married couples it is no $225,000.
2.] For current home owners: Current homeowners are eligible for a tax credit of up to $6500 when they purchase their next primary residence. Current homeowners must have lived in their residence for at least 5 consecutive years over the last 8 years. Current homebuyers must have a signed purchase agreement in place as first-time buyers…May 1and June 30 respectively.
3.] Additional details: There is a cap on the house price…$800,000 and they must occupy the home as their primary residence for at least 3 years to avoid paying back the tax credit. Buyers are allowed to claim the credit back on their 2009 taxes, even if the purchase was made in 2010, by filing an amended return. Military personnel, deployed overseas for a minimum of 90 days in 2008/2009, will have until April 30th, 2001 to claim the tax credit. The bill is estimated to have a cost of at least $10 billion.
This is a welcome relief for the housing market. Although housing sales have risen significantly due to the tax credit already in place, it has become increasingly challenging for buyers to get purchases closed when in a short sale scenario, as the banks are so overloaded that they cannot respond in an appropriate length of time, therefore many buyers backed out of their short sale purchases under the concerns of missing out on the $8000 tax credit. This tax credit extension will provide a stop-gap to help aid the housing recovery, but we still have numerous issues to resolve before we can say that our economy has stabilized. For more information on the tax credit, go to www.federalhousingcredit.com. Last week, it was reported that the jobless rate has gone north of 10% for the first time since 1983…and is likely to go higher. In addition, many economists worry that the continued high unemployment rate could undermine the recovery by restraining consumer spending, which accounts for about 70% of the economy. Even this figure is skewed…if you take into consideration those who have settled for par-time jobs or stopped looking for work, the unemployment rate should be at least 17.5%!
We are facing challenging times. We have many obstacles in front of our path. We must empower ourselves to find creative ways to deal with those challenges. We must reinvent ourselves…create new jobs, created the drive to “push through”. Create the belief in ourselves and stop relying on the government…that type of independence is empowering!