In November, President Obama signed into law an expanded Homebuyer Tax Credit bill, which extended the deadlines into 2010 and added a new $6,500 credit, expanding the pool of eligibility beyond first time home buyers. Several provisions in the bill became effective immediately.

The new legislation extended the existing $8,000 first-time homebuyer credit beyond its scheduled November 30, 2009 expiration date and into the spring of 2010. A $6,500 credit also will be offered to existing homeowners who sell their current property and purchase a primary residence that costs $800,000 or less. To be eligible for the tax break, homebuyers would have to be under contract by April 30, 2010, with closings wrapped up no later than 60 days after that. Homebuyers who owned their primary residence for five out of the last eight years can claim the $6,500 tax credit for purchases made after November 6th.

In addition, the extended income limits in the bill are now applicable for both first-time homebuyers and repeat homebuyers. The extended income limit for couples filing jointly is now $225,000, with the credit phased out over the next $20,000 in income. These new limits cannot be applied retroactively to deals completed before November 7th.

This kind of government intervention to date has been extremely helpful in preventing an even more dramatic decline in home prices. One economist pointed out that if you look at the data, housing demand has actually only fallen to normal levels and stabilized there. Without historically low mortgage rates, support for Freddie Mac, Fannie Mae and FHA, and an $8,000 tax credit, how far would sales have fallen this year and what would that decline in demand have done to pricing?

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This entry was posted on Monday, December 7th, 2009 at 5:27 pm and is filed under Real Estate. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.