CFAH

A homebuyer tax credit of up to $15,000 has passed in the U.S. Senate. Unlike the current $7,500 tax credit for first-time buyers, as proposed this credit would be available to all buyers of primary residences and would not need to be repaid. Not unlike efforts to lower rates, if eventually signed into law it will be a nice bonus to buyers but we see it having little direct effect on boosting new demand (or prices) in San Francisco.

Comments from Plugged-In Readers

  1. Posted by karl and lenny

    Does anyone know when you need to buy to qualify for this credit…if it passes? Does it include purchases in 2008 or only 2009 and forward?

  2. Posted by rr

    I read the full amendment last night. Some observations:
    -it only applies from the time the bill is passed to 1 year following
    -it is not retroactive to the beginning of the previous $7500 credit
    -unlike the language the amendment struck and replaced, it does nothing to change the status of those who can claim the $7500 credit. The old bill made the credit non-repayable no matter when you claimed it, whereas this leaves the status of the $7500 credit as loan and just replaces it going forward.
    The first two are debatable, but I think the third is an oversight. The $7500 credit was made a loan because of some sort of treasury neutrality law regarding anything that is not a special class of bill. They would have made it a bonafide credit if they could have, and it appears they intended to with the stimulus bill, but, in the rush to put the amendment in, they inadvertently took that clause back out.

  3. Posted by rr

    Forgot to add, here is the full text of the amendment as provided by the NY Times

  4. Posted by scurvy

    I don’t see how this is going to help employment at all if you don’t limit it to only new housing.

  5. Posted by not bitter renter

    “I don’t see how this is going to help employment at all if you don’t limit it to only new housing. ”
    Scurvy – Have a lemon, you’ll feel better.
    While your sucking on it, think about all of the services involved in a real estate transaction. A few:
    Title
    Inspection
    Loan
    Agent
    Moving
    Renovation
    Decorating
    Etc. Etc.

  6. Posted by Rillion

    I would assume the theory is that it will stimulate demand for homes, which will help stop the decline in home prices, which will help stop the continued write down of bank balance sheets as home values (and the value of bonds tied to home prices), which will allow banks to start loaning out more money, which will lead to job creation. That I imagine is the hope behind that tax credit. I will not offer an opinion on if it will work or not as I long ago stopped trying to make any predictions about what is going to happen in this economy.

  7. Posted by FHB

    ‘ all buyers of primary residences and not need to be repaid.’
    What’s the meaning of ‘not need to be repaid’? You don’t need to pay back?

  8. Posted by Trip

    I think this might stimulate sales in areas where homes sell for, say $200,000 (i.e. most of the country). A $15,000 credit would ease the strain from a $40,000 down payment, and it also may persuade banks to lighten lending standards a bit to assist those at the margins. But I don’t see how this could have any impact in SF with $1,000,000-plus homes where this $15,000 sum is not much more than a rounding error.
    And I agree with scurvy that offering this credit for purchases of existing homes will have close to zero impact on employment or the economy.

  9. Posted by jj

    LOL, as if a few more real estate agents will improve the employment picture. One year time limit means home price will drop proportionately after one year, everything being the same. That means home buyers won’t get much out of it. Which is a good thing. Home buyers don’t need welfare. I don’t.

  10. Posted by diemos

    “What’s the meaning of ‘not need to be repaid’?”
    Free government cheese.

  11. Posted by kel

    Anyone know if those with AMT issues can claim this?

  12. Posted by 1stTimeBuyer

    kel – great question re: AMT.
    I’ve been sitting on the buyer’s sidelines for about 6 months now and this is exactly the kind of incentive I was waiting for. It’s hard to motivate people who have a downpayment in the bank and are paying low rent to jump into the housing market in the midst of all this instability. This tax credit be enough to get them to bite the bullet. We’ll see what the final package looks like.

  13. Posted by G-man

    $15k refund will be a pittance when your house is worth 10-20% less next year.
    Pass the lemons.

  14. Posted by DanRH

    “But I don’t see how this could have any impact in SF with $1,000,000-plus homes where this $15,000 sum is not much more than a rounding error.”
    $15K is not something I’d sneeze at. If I’m buying a $1M home, I’m putting down $200K. $15K is 7.5% of that $200K. That means I’m basically now putting down $185k and i’ve got (mentally) $15k in the bank to keep for my suggested-6mos-to-1yr savings.
    Maybe for the $3M homebuyer, it’s more chump change, but with a LOT of inventory at $750k to $1Mk in SF, that’s an ok plus / benefit.
    Sure wish I had that when I bought.

  15. Posted by Alex

    I don’t think you can claim this if you make over $170,000 so it is pretty worthless here in San Francisco.

  16. Posted by John

    It’s just a ploy to add $15,000 to the value of all houses nationwide.

  17. Posted by The Milkshake of Despair

    This seems to be another asymmetrical credit. $15K is about 10% of the purchase price of an average house in the USA, but it is 2% here in SF. Plus if what Alex says is correct then the credit is really 0% for the real SF.
    Its not too surprising that stimulus measures aren’t valid for the wealthiest regions.

  18. Posted by SFwatcher

    Isn’t it tax credit of 15K?? That means you don’t get all 15K for yourself, you can deduct 15K from your income for tax purposes…Am I missing something?

  19. Posted by Trip

    SFwatcher, it’s a tax credit, not a deduction. You deduct the $15,000 from your tax bill. But as others have noted, this can get complicated once you factor in AMT, income phaseouts, etc. I don’t know how any of those affect this.

  20. Posted by Tall Guy

    Can anyone confirm the income cap on this? Is the $170K real?

  21. Posted by resp

    if milkshake is correct (and he probably is) that the average american home is about $150K then the average RATIONAL buyer (if there is such a thing) must have the expectation that his real estate investment will do better than down 10% in order to be put over the fence by this “stimulus”. how many americans are confident in this nowadays? uh, probably the ones that shouldn’t be taking the risk.
    so we’re gonna get even more marginal buyers buying in a declining market? great.
    DanRH’s logic scares me. he’s looking at this as a 7.5% savings on his downpayment when he should be looking at it as a 1.5% savings on his $1M purchase. good luck Dan if you think this market ain’t going down another 1.5%.

  22. Posted by Nathan

    This is a way of helping both the banks and the consumers at the same time. This policy will drive sales and right where they are needed most, on foreclosures and short sales as these are a large portion of the homes currently on the market right now. The benefit to this is that many distressed properties are trashed or damaged and will require money to fix up. The foreclosed homes are also a large reason for the price declines in many areas. Removing these from the market will help increases prices all around.
    The only way this would benefit the purchase of million dollar homes is if the 15K Cap was removed. But a 100,000 tax credit is a hard number to swallow.

  23. Posted by Atlanta Resident

    The $15k tax credit is what I have been waiting for. I have been sitting on the fence for over a year waiting to see what the housing market is going to do. With interest rates low and the tax advantage it is close to borrowing money for free. Why tie up your own money? Now with the possible $15k tax credit, it makes buying a home with such low prices a real sweet deal!

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