The good news keeps on rolling in today. The idea that the economy has moved out of recession was the first bit of good news this morning. But things continue to improve — especially if you are hoping to buy a home.
The first time home buyer tax credit is set to expire on November 30. However, since you have to close on the mortgage by that date, if you haven’t already started the paperwork, you probably won’t make the cut off. Unless the tax credit is extended, as it very well could be. Daily Finance is reporting that Senate players have reached a tentative agreement to extend the first time home buyer tax credit until the end of April 2010. Additionally, there is also a tentative plan to allow those who already own a home to buy primary residence with the help of a $6,500 tax credit.
It’s a far cry from extending the credit through the end of 2010 and a $15,000 tax credit for everyone. But it is still likely to get the job of keeping the housing market from a second collapse done. And it will probably help with the housing market recovery overall.
There are downsides to continuing the tax credit, though:
- More spending: It will mean more spending by a government that is already over-burdened with debt, thanks to decades of deficit spending by both parties.
- Reliance on the tax credit: There are concerns that the housing market will become too reliant on the tax credit, and unable to sustain itself without the credit.
- Encouragement to buy when it may not be time: While the tax credit can help fence sitters and provide an impetus to take the home ownership plunge, it might also encourage some to buy when they aren’t ready. No matter how good the deals are, it is important to carefully consider your decision to make a purchase that is as large as a home.
In the end, I expect that we will see an extension to the tax credit. What I’m really interested to see, though, is whether or not a home buyer tax credit becomes a permanent feature of the tax system, a la mortgage interest tax breaks.