Last week at this time, there was a flurry of conversation around the fact that the Senate had announced that they had approved a $15,000 tax credit for all individuals purchasing new homes (first time buyers and previous homeowners) in 2009, and that it would be a pure credit (would not have to be paid back like the previous version). This created an enormous wave of excitement…except for one thing…the House did not see eye to eye with them on this proposal.
Over the course of the last week, the subcommittees from the House and the Senate got together and ironed out a combined version that they could agree on, and felt would pass a vote on both floors. Unfortunately, the House did not see eye-to-eye on the housing proposal floated by the Senate, and much to the chagrin of the many in our sector, the initial proposal from the Senate was paired down significantly.
So rather than dwelling on what could have been, let’s make lemonade out of lemons and analyze what the new proposal looks like:
The new bill, which will be voted on in both sectors in the coming days, increases the size of an existing temporary and refundable first-time home buyer credit to $8,000, up from $7,500. It will be applicable only for first time homebuyers, but removes the requirement under current law that the credit be paid back if the buyer stays in the home for at least three years. It extends the credit’s expiration date to Dec. 1, 2009, previously July 1. Those eligible for this credit must have purchased a home after Jan. 1, 2009, and before Dec. 1, 2009.
Additionally, as a potential tradeoff to assist the housing sector, the administration is creating a proposed plan to subsidize mortgage payments for troubled homeowners. There were numerous reports yesterday afternoon that the administration will work with mortgagors to re-write and subsidize mortgage payments for those with difficulty, but must pass a means test, which would stem the tide of foreclosures and keep unwanted inventory off the market.
We will continue to pay a close eye on this as this evolves.