It’s one of the biggest unknowns bugging would-be buyers of houses and condos this summer: Will Congress let the $8,000 nonrepayable tax credit for first-time purchasers expire as scheduled 14 weeks from now?
Or will the credit get a second life and be extended for six to 12 months, taking pressure off buyers, real estate agents and escrow companies?
That’s an especially urgent matter if you’re a buyer just starting to shop and you see entry-level prices bottoming out or rebounding in many local markets. The tax credit statute requires buyers to fully close on their purchases -- not just be in escrow -- no later than Nov. 30. This doesn’t leave a lot of leeway for people who haven’t yet decided on a specific house and who haven’t nailed down financing.
The process of negotiating offers, signing sales contracts, applying for a loan and completing the closing can easily extend for two months -- or a lot longer if things get off track.
Given the rapidly approaching deadline, what’s the likelihood that Congress will allow at least a little extra time? Here’s a quick overview: Although Congress is on its summer break, most members of the Senate and House use part of the August recess to meet with and listen to constituents in their home districts.
This year, the two biggest housing trade groups -- the National Assn. of Realtors and the National Assn. of Home Builders -- are spending the month mounting intense lobbying campaigns to make the case for extending the credit and maybe even expanding it. The effort is targeted first at the districts of members of the two tax-writing committees -- House Ways and Means and Senate Finance -- but is expected to cover most other members as well, according to officials of the two groups.
Delegations of home builders and real estate brokers already have begun descending on district offices, delivering what Jerry Howard, president and chief executive of the builders association, calls “the hard economic facts” -- the numbers of houses sold in each Congress member’s district that are attributable to the tax credit; the economic ripple effects on local businesses, manufacturers and service industries; new jobs and income; plus the additional tax revenue that all this activity will help produce for local governments.
On a national basis, according to economists at the National Assn. of Realtors, the credit will be responsible for 300,000 to 350,000 additional sales of houses this year. Each home sale generates about $63,000 in downstream “ripple effects” elsewhere in the economy, they say.
If you accept the numbers, which some analysts consider a stretch, this means the housing credit provides a powerful, immediate stimulus bang for the buck. Failure to extend what may be one of the most effective pieces of the Obama administration’s 2009 stimulus legislation would cost jobs, economic growth and tax revenue, the housing groups contend.
There are some signs that Congress may be getting the message. Bills are pending in both houses to extend the credit for another year. Senate Majority Leader Harry Reid (D-Nev.), whose state has been among the worst hit by the housing bust, reportedly favors an extension of the credit. He was quoted to that effect by the Las Vegas Sun on Aug. 5.
Sen. Christopher J. Dodd (D-Conn.), chairman of the Senate Banking Committee, is cosponsoring a bill with Sen. Johnny Isakson (R-Ga.) that would raise the credit amount to a maximum of $15,000. Meanwhile, the Realtors and the builders are pushing not only for extension of the credit, but for broadening it to cover all home purchases in 2010.
But can any of this happen before the Nov. 30 deadline? The key complicating factor here is Congress’ heavy load of higher-profile issues that will get attention before anything else in September and October. On top of that, a tax credit extension would cost billions in lost revenue -- a big negative when the federal budget deficit is in record red-ink territory.
In the end, however, given the political economics of the housing credit, the odds favor some sort of extension, probably later rather than sooner.
Distributed by the Washington Post Writers Group.