With almost $840 billion dollars to stimulate the economy, I’m wondering what exactly that is going to mean to the real estate market. Sure there are some reports out there that state this stimulus package may be “exactly what is needed to turn around the real-estate industry,” but will that infusion of money be too little too late?
The passage of the bill, and a provision in the Senate version passed earlier this past week, will now allow for a tax credit to be given to home buyers for 10% of the purchase price up to a maximum amount of $15,000 dollars. Hopefully, this package will come with fewer strings than the previous stimulus package, the Housing & Economic Recovery Act of 2008, passed late last summer. Unfortunately, though the intentions were good, the previous stimulus package, which offered up to $7,500 dollars in tax credit to home buyers, was tied up in stipulations and regulations, thereby preventing that package from having any real effect on the real estate market or general economy.
The added Senate provisions in this most recent stimulus package will attempt to lure home buyers back into the ailing housing markets. Though the House was looking for a package that appealed strictly to first time buyers, the Senate recognized the urgency in the market and quickly raised the tax credit cap (up from $7,500 dollars) and included anyone purchasing a primary residence, not just the first time home buyers.
Another Senate addition to the plan was the inclusion of this tax credit being non-refundable. In short, a buyer can claim their credit only if they owe income taxes. Additionally, buyers can claim the credit on two years of tax returns. The previous House provision called it a ‘refundable’ tax, which means that even those buyers that do not owe federal income taxes will receive a check. What’s more, claiming the tax will be fairly straight forward, simply claim it on your federal tax return. No other forms or paperwork will need to be completed to receive the credit.
But the news is still pretty bad on the job front, with unemployment rates continuing to soar and more layoffs in the weeks to come. Combined with tighter lending qualifications for those that are actually looking to take advantage of that home buyer’s tax credit, many think the downward spiraling economic news by be too much for most to look favorably upon the tax credit offered by the latest stimulus package.
Whatever the opinion at how this package will affect the American economy, we will not begin to see until probably late-spring, assuming the House and the Senate can work out their differences by next Monday, when the President is expected to sign the bill. From the perspective of this real estate broker, however, I think this economic package and the provisions in place for the housing industry just may be the economic jolt to get the housing market health back on track.