Senate Considers Boosting Home Buyer Tax Credit
Last week, the government announced that it is allowing home buyers to use their first-time home buyer tax credit toward closing costs and down payments. This news is likely to make it possible for more first time home buyers to afford homes. However, some lawmakers are concerned that there is too much focus on first time home buyers, and not enough help for other home buyers.
As a result, Georgia Senator Johnny Isakson (R) is introducing legislation aimed at increasing the tax credit to $15,000 and making it available to every home buyer. (This was attempted in February in the economic stimulus bill, but it didn’t go through.) Bible Money Matters nicely summarizes the main provisions for this $15,000 tax credit:
- The bill nearly doubles the first-time buyer tax credit to $15,000. (10% of the purchase price – up to $15,000)
- You wouldn’t have to be a first time homebuyer. Anyone, including move-up buyers could take advantage.
- Income requirements would be removed, so anyone, even millionaires, would be able to take advantage of the credit.
- Tax credit would be available for 1 year from the signing of the bill. That means the credit would be available well into 2010.
As one might imagine, mortgage lenders and real estate agents (Isakson was a real estate agent in his former life) are chomping at the bit to see this thing pass. Some are concerned that another $35 billion in taxpayer costs — no matter how paltry the amount seems next to the trillions already spent — is unnecessary and potentially harmful.
My main concern is the possible creation of another real estate bubble. Would this drive up home values rapidly, only to see them crash again when the tax credit disappears? It seems as though the limits from the current first time home buyer tax credit insulate against the bubble effect. But if everyone — with no income limit — were to participate, then a bubble might be inevitable.
