With the first time homebuyer’s tax credit being extended to April 30, 2010, Congress is hoping that it helps further rebuild the housing market, but one CSU real estate professor said he doubts the credit has had or will have much impact on home buyers.
The initial tax credit was a part of the Obama administration’s $787 billion economic recovery package that was passed last January in order to help rebuild the overall state of the U.S. economy.
The credit gives first-time homebuyers 10 percent, or up to $8,000, of their home’s value back if they bought their home in 2009 or early 2010, and up to $7,500 for people who buy a home later.
Long-time homeowners who buy a replacement home after Nov. 6 may also qualify for a credit of up to $6,500.
Spokesperson for Rep. Betsy Markey, D-4, Ben Marter said so far the credit has had a positive impact on the recovering economy.
“There are many success stories within the economic recovery package, but this one more specifically gave Congress enough confidence to renew it since it has continually increased the market sales,” Marter said.
Since the recovery bill was passed, the housing market has seen nine consecutive months of increase and an estimated amount of about 355,000 house sales were attributed to the first time homebuyer’s tax credit, this according to the National Association of Realtors.
But, local real estate expert and CSU professor Sriram Villupuram said that these estimates could only be taken at face value.
“It is hard to say how many of those estimated 355,000 sales were actually due to the tax incentive. Unless there was a fly on the wall at every one of those closings, these numbers should only be taken as an estimate,” Villupuram said.
He went on to say that he can see how the tax credit could have aided the housing market recovery over the past nine months but said the story behind the numbers could be condo sales, not house sales.
“Condos that go for anywhere in the $100,000 range, the tax credit probably has a great effect on whether or not the buyer will close on that type of property or not,” Villupuram said. “But, on houses that cost $500,000 or more, I doubt that $8,000 in tax incentives will make a big difference.”
It’s also important to realize that the tax credit is not a check sent to buyers by the government, Villupuram said, but is money added onto the buyer’s tax return and only applies to people who can prove they have a steady income flow.
For this reason he said he only sees certain students, such as those who receive steady money through a stipend or other means, potentially benefiting from the tax credit. Even for them, he said, getting the credit could be complicated because of how tight the credit market currently is.
“For that same reason, undergrad students will most likely not gain anything from this unless they are already pretty wealthy,” Villupuram said.
Yet, local real estate agent Kirsten Chapman-Gurmend thinks that any student can benefit from the tax credit because there is nothing in the legislation that prevents current home owners from cosigning for a house, opening the door for anyone who has family or friends with the means to buy a house to take advantage of the tax credit and maybe even make money off of it.
“Because there is nothing in the bill that limits who the cosigner is, really anybody can sign on or even turn around a sell it down the road since chances are, the students won’t keep that house, allowing them to possibly sell it for more than they bought it,” she said.
Staff writer Vince Crespin can be reached at firstname.lastname@example.org.