By Adam Van Brimmer
RISMEDIA, November 2, 2009—(MCT)—Local real estate professionals hear a clock ticking, and they’re sure it’s wired to the economy. The federal government’s first-time homebuyer tax credit is scheduled to expire Nov. 30. The credit, part of the Obama administration-backed economic stimulus package, rewards Americans for buying a home by cutting them a check for 10% of the purchase price up to $8,000.
Housing industry insiders fear the tax credit’s expiration will hurt the residential market’s recovery. Analysts attribute close to 20% of home sales nationally this year to buyers eligible for the tax credit, and the National Association of Realtors claims first-time buyers account for 50% of all sales.
While Congress is moving toward extending, expanding or replacing the tax credit, the Senate is expected to vote soon on a bill co-sponsored by Georgia Republican Johnny Isakson that would extend the deadline five months to April 30, 2010, and make the credit available to all new homebuyers, not just to first-timers. The new legislation would extend the $8,000 credit for first-time buyers and create a $6,500 credit for others so long as they have owned a home for at least five consecutive years since 2001.
“I think it is critical that the credit continue in some form,” said Molly Bridges, president of the Savannah Board of Realtors. “Traditionally, the market slows down at the holidays, and it’s important to keep the momentum going. We don’t want a pause.”
The housing credit’s impact is particularly pronounced in the Savannah area. The number of first-time buyers locally is unavailable, but pricing and loan trends indicate they could make up more than 40% of the market. Homes priced under $200,000 have outsold those priced above that number by almost a 2-to-1 margin this year, with homes priced for $100,000 to $149,999- “starter homes”- outpacing all others. And almost half of the houses financed locally this year were done with loans backed by the Federal Housing Administration or the Veterans Administration, which cater to first-time buyers.
A drop in local building permit applications in September offered a glimpse of what a creditless future could look like. Permits tripled in Chatham County during the summer months as builders began construction on homes that could be completed in time to be bought and occupied ahead of the Nov. 30 tax credit deadline. Permit numbers dropped drastically in August and September, a trend the head of the local homebuilders association, Matthew Young, said reflected the industry’s wait-and-see approach to the post-tax credit market. “If they don’t extend” the credit, Young said, “they will wait and see what sales are like after that.”
Analysts opposed to a tax-credit extension question how many of the buyers the $8,000 handout actually coaxed into the market. An economist with the Brookings Institution, a nonprofit public policy organization, estimates 85% of those who have used the credit would have bought a home anyway, given low prices and mortgage rates. Of about 2 million buyers who would make use of the credit were it extended through 2010, 1.6 million would buy even without the credit, the economist estimates.
Local Realtors disagree. “I know personally of plenty of people who have bought just because of the tax credit,” Bridges said. “They were on the fence, worried about the economy and their jobs and not ready to jump in, but the credit pushed them over the edge and got them buying.” The revamped tax credit proposal would be a major infusion for the market, Bridges said. The new legislation would make the credit available to “move-up” buyers- current homeowners looking to sell their homes and buy more expensive residences- and to those with incomes as high as $125,000 a year. “The move-up folks would be more willing to sell their homes at lower prices,” Bridges said. “Everybody would benefit.”
That includes builders, said Fred Williams of Fred Williams Homebuilder Inc.
“Broadening the credit would definitely help,” Williams said. “The lower-price houses were the ones being built with the summer permits. If the credit expands, the builders would build bigger, more expensive homes.”
Copyright (c) 2009, Savannah Morning News, Ga.
Distributed by McClatchy-Tribune Information Services.
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