White House eyes extending home buyer tax credit

From the National Association of Home Builders -- Amidst growing concerns in the Administration and Congress over worrisome prospects for reducing the nation’s lengthening unemployment lines and further strengthening the economy as it moves tentatively toward recovery, Washington turned a sharper focus last week on extending the current $8,000 tax credit for first-time buyers beyond its Nov. 30 expiration date and expanding it to a wider circle of principal home buyers.

Following some encouraging remarks from White House Press Secretary Robert Gibbs, NAHB on Oct. 6 said that home builders were ready to work with the White House and Congress to extend the credit and help bolster the lackluster economy.

“The tax credit has clearly had a positive effect on housing demand and in the job market,” said NAHB Chairman Joe Robson. “We stand ready to work with President Obama and the Congress to extend and enhance the tax credit to help reduce foreclosures and excess housing inventories, to stabilize home values and to push housing and the economy on a glide path to recovery.”

NAHB estimates conservatively that the current tax credit has been responsible for some 200,000 additional home sales since early this year, resulting in a net increase of 187,000 jobs. Extending the tax incentive through Nov. 30, 2010 and making it available to all income-qualified purchasers of a principal residence would result in an additional 383,000 home sales and generate 347,000 new jobs in the coming year, according to NAHB economists.

At an Oct. 5 press briefing, Gibbs said that “there has been quite a bit of success” with the home buyer tax credit, and he added that the President is considering extending it to strengthen the economy and create jobs.

“Housing is the best opportunity to put this country back to work,” said Robson. “Prompt congressional action on the tax credit is a crucial first step to shoring up the fragile housing recovery and leading the economy to higher ground.”

A Meeting in the Oval Office

The New York Times reported on Oct. 7 that extending the credit was briefly mentioned in a meeting that day in the Oval Office between President Obama and Democratic congressional leaders Rep. Nancy Pelosi, (Calif.), speaker of the House, and Sen. Harry Reid (Nev.), the Senate majority leader. Congressional aides indicated that a tax credit extension is being viewed as an option for stimulating the economy and job creation and extending it beyond first-time buyers is being considered.

In a statement following the White House meeting, Reid said that, “we need to continue working toward ensuring that more families can stay in their current homes and continue efforts to strengthen the housing market by extending the tax credit.”

The New York Times story also cited warnings from Mark Zandi, chief economist at Moody’s Economy.com, that allowing the tax credit to expire would slow the sales of new homes not facing foreclosure just as sales of foreclosed homes are expected to pick up, which would put downward pressure on home prices.

“The economic recovery will not evolve into a self-sustaining economic expansion and risks unraveling back into recession until house prices stop falling,” Zandi said in an interview.

Tax Credit Gains Momentum

In a sign that the tax credit is gaining momentum, the House on Oct. 8 passed H.R. 3590, the “Service Members Home Ownership Tax Act of 2009,” by a margin of 416 to 0.

Introduced by House Ways and Means Committee Chairman Charles Rangel (D-N.Y.), the bill would extend the current home buyer tax credit for an additional one year for qualifying members of the military service. The legislation would also waive the recapture requirement for service members who are forced to sell their home within three years because of a change in duty station.

Facing the Headwinds