Despite the dismal sales of new U.S. homes last month, the Obama administration is not yet sure about extending the First-Time Homebuyer Tax Credit, but it is eyeing other moves to revive the housing market.
Last week, the Commerce Department reported that sales of new homes unexpectedly plunged 12.4 percent in July to the lowest level since 1963, when the federal government originally began keeping records on home sales. Sales of new single-family homes in July amounted to a disappointing 276,000 units, 32.4 percent less than in July 2009. The steep decline has been attributed in part to the expiration of the First-Time Homebuyer Tax Credit, which primed the pump on the housing market this year and last year.
On CNNs State of the Union program on Sunday, Housing and Urban Development Secretary Shaun Donovan was asked whether the administration plans to extend the tax credit. However, Donovan responded cautiously, Its too early to say after one month of numbers whether the house credit will be revived or not.
The $8,000 maximum refundable tax credit for first-time homebuyers was included in the Recovery Act that Congress passed in February 2009 and was originally set to expire last November. But then the real estate, mortgage and construction industries pushed for an extension of the tax credit, and it was extended last November until April 30, 2010, including a tax credit for up to $6,500 for existing homeowners who want to buy a new home (see Senate Extends Homebuyer Tax Credit).
Last month, Congress managed to pass an extension of the closing date of the credit to Sept. 30, but thats only for buyers who entered into a contract on a purchase on or before April 30 (see Homebuyer Tax Credit Closing Deadline Extended).
In the meantime, the administration is going ahead with other moves in an effort to kick-start the market. It will commence a Federal Housing Authority refinancing program to assist people who are having trouble paying their mortgages, along with an emergency homeowner loan program for unemployed homeowners to help them stay in their residences.
Those sound like good moves for those in danger of losing their homes, but if the administration wants to make sure that more people decide to purchase new homes, the tax credit has proven to be an effective way. With the right safeguards in place, they can boost the housing market and protect against abuses that have been uncovered with the tax credits (see Audit Finds $636M in Bogus Homebuyer Credits). In other words, no more Homebuyer Tax Credits for four-year-olds.