Goodbye, Homebuyer Tax Credits
Today, April 30, is the last day for the Obama administration’s tax-credit programs for homebuyers. Purchasers need to have signed a binding agreement by the end of the day and have closed on the home by June 30 in order to receive the credits — $8,000 if it is their first home and $6,500 if they are trading up. Reportedly, the sunset of the valuable credit has caused realtors and homebuyers to “go nuts“: many realtors are staying open until midnight, partially vacant housing units are hosting lush open houses and properties are being snatched up in bidding wars.
The question is the extent to which the tax credits are the life in the market. By Feb. 20, $1.8 million people had claimed the credit at a cost of $12.6 billion, the Treasury Department said, but many of those buyers would have purchased a home anyway. But anecdotally, at least, the tax credits have been driving the market over the past 60 days, as it became clear that Congress would not renew the costly program. (“I think that’s pretty much it,” Sen. Chris Dodd (D-Conn.) said.)
And everyone is holding their breath for a crash — or, really, silence — come Saturday morning. The fundamentals are just not good. Unemployment is high. Foreclosures are peaking. Unemployment benefits for more than a million people might expire, pushing foreclosures even higher. The Obama administration’s housing programs have been broadly ineffective. The amount of shadow inventory is extraordinary. And the amount of governmental intervention was massive. In many parts of the country, the market seems to have stabilized. In others, the downward pressures seem too great.