The first time home buyer tax credit is currently set to expire on November 30, 2009. As the law currently stands, only homes purchases with a closing date before the end of November will qualify for the $8,000 credit.
I have said, numerous times, that I believe the credit will be extended.
You: Why? Who do you know?
I don’t know anybody with influence in Washington, but logic says the credit will be extended.
You: Explain this logic.
Many experts believe that the credit itself, combined with the aggressive actions of the Federal Reserve and Treasury Department (by effectively and dramatically lowering mortgage interest rates), has created an artifical bottom in the market. Despite this, an incredible percentage of homeowners remain under water.
You: What exactly does “under water” mean?
That they owe more on their homes than their homes are worth. Furthermore, foreclosures are at record highs and inventories are still high by historic standards. While some areas of the country have clearly stabilized, others have not.
I have always thought that the government would be extremely averse to removing stimulus from the housing market until it was self-evident it could stand on its own. The housing market does not appear capable of doing so today.
You: Why do you say so?
In my experience looking for a home in a market (southern New Hampshire) this year, a market most characterize as relatively stable, I have been very impressed by how little activity has taken place in the mid-market.
Meaning homes priced beyond typical starter homes but for far less than anything considered luxury. In other words, solidly middle class homes simply aren’t moving because buyers and sellers have very different opinions about what homes are currently worth. As such, many very nice homes have been on the market for over a year.
That’s evidence that the market is not working normally.
For all of these reasons, I continue to expect the credit to be extended. But remember I leave in the real world, not Washington. In our nation’s capitol, as Ilyce Glink reports, $8,000 Tax Credit Extension? White House Says Maybe.