Will They? Won’t They? The White House Offers Little on the First-Time Buyer Credit

The tax credit seems to be all the rage in the real estate world these days, and for good reason … it’s going to expire.  See that ticker on the right side of your screen (if you’re on a mobile phone, apologies – you’ll just have to imagine it) – that ticker is counting down to the expiration date of the first-time buyer credit on November 30th.  Any home buyer, who hasn’t owned a home in the last three years and who close on or before November 30th, is eligible for up to $8000 in tax credits.  Anyone who closes AFTER November 30th gets … zero … nothing.

Unless the tax credit is extended, which is possible … or not.  No one really knows.  Earlier this month, the White House Press Secretary Robert Gibbs talked a little about the credit, but gave no real specifics on what the White House hoped would happen to the credit.  He did insinuate that the tax credit had been a positive thing for the economy, but backtracked on suggesting that it would be extended.  Here is the full text of that briefing, from Time, as well as a couple of excerpts (my emphases added):

Q On the additional measures — you know, the COBRA, the extending unemployment tax, the home buyer — which one do you think has been most effective in terms of stimulus and creating jobs?

MR. GIBBS: Hans, I’m not an economist. Obviously, I think in terms of — as I said to Athena, I think when you’ve lost your job, making sure that you have health care is tremendously important. I think if you’ve lost your job having extended and enhanced unemployment benefits are tremendously important. Obviously, there has been quite a bit of success in the first-time homebuyer’s tax credit. And I think overall, the recovery plan has had a great and positive impact on our economy.

and then

Q But the homebuyer tax credit in the first stimulus package, you guys extending it outside of the — it wouldn’t be a second stimulus?

MR. GIBBS: Again, decisions on this haven’t been made. I just was simply talking about what people had been discussing with Congress, and programs that are soon going to meet legislative deadlines.

So what will happen?  Who knows.  I think (which means nothing other than the synapses in that goo up there started firing a little) that it’ll be extended, but then I’ve never had a lucky streak in Vegas either so don’t bet on me.  In the grand scheme of things, though, the administration wants good vibes continuing into 2010, and a boost to the housing stock would help that.  There are many that argue extending the tax credit is the wrong thing to do, and an article in today’s Wall Street Journal states the cost per credit to be as much as $43000 each time:

Ted Gayer, a scholar at the liberal Brookings Institution, argued in a recent paper that the credit costs the government about $43,000 for each additional home sale it produces. That is because most of the two million or so home buyers expected to claim the credit would have bought a house anyway. Only about 350,000 were additional buyers. Expanding the credit to make all home buyers potentially eligible would swell the government’s cost per additional home sale to more than $250,000, said Mr. Gayer, co-director of economic studies at Brookings.

Economists at the National Association of Realtors said they don’t disagree with Mr. Gayer’s analysis of the existing credit’s cost to the government. But they said he plays down the impact the program is having in supporting home prices and related expenditures.

Personally, I want the credit to be extended because it brought people into the market.  Did it bring 350000 additional buyers into the market?  Who really knows?  I can say with certainty that I had the pleasure of working with several buyers who would not have purchased in 2009 had the $8000 tax credit not been available to them, and another closes later this month (no more grocery runs up three flights of stairs, John!).

What are your thoughts?  Tax credit good?  Bad?  Don’t leave me hanging, someone chime in!

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