Michael on October 30th, 2009
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Within my post last week titled First time home buyer tax credit may actually expire, I maintained my steadfast belief that Congress and President Obama would not allow the credit to end.  Simply stated, I argued, the housing market is still so unstable that taking away stimulus was unlikely.  (Furthermore, it’s far easier for the government  to defend stimulating a market even if things take off than to defend passing on a stimulus package should things crash.)

Nonetheless, there was serious talk last week about letting the credit expire.

Just a few days later, the President has officially weighed in on the side of extending the credit.

Now my confidence level in the extension is at about 99%.

You: What will change as a result of the credit extension?

Nothing is certain given the ongoing negotations between Republicans and Democrats, particularly in the Senate.  Nontheless, here are the key provisions likley to be impacted:

Delayed Expiration Date

To qualify under today’s laws, you must close on your house by November 30, 2009.  The most likely outcome of the current legislation is a requirement that you are under contract by April 30, 2010 and that you close within 60 days.

Higher Income Limitations

Rather than phaseouts beginning at $75K and $150K (single and married, respectively), the new ranges would begin at $125K and $225

Maximum Home Price

Today, there is no limit on the price of the home purchased to qualify for the credit.  Congress is mulling over an $800,000 limitation going forward.

Possible Expansion to Existing Home Owners

Congress is considering allowing those who have lived in their homes five years or longer the ability to qualify for a smaller credit.  Expect significant complaining by those who purchased their homes in late 2005 who would just miss out if this provision passes.

None of the above should be considered final because the bill hasn’t passed yet and negotiations are ongoing.  They’re expecting to vote next week. Stay tuned, I’ll keep you posted.

What do you think of this possible legislation?

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