Advertising

The Seattle Times Company

NWjobs | NWautos | NWhomes | NWsource | Free Classifieds | seattletimes.com

The Seattle Times

Real estate


Our network sites seattletimes.com | Advanced

Originally published Saturday, October 31, 2009 at 12:08 AM

Comments (0)     E-mail E-mail article      Print Print view      Share Share

Homebuyer tax credit's impact exaggerated, analysts say

Congress is a step closer to extending the $8,000 first-time-homebuyer tax credit and offering a new credit to other types of buyers, but...

MarketWatch

BOSTON — Congress is a step closer to extending the $8,000 first-time-homebuyer tax credit and offering a new credit to other types of buyers, but some analysts are downplaying the stimulus' effect on the housing market.

Fox-Pitt Kelton analyst Robert Stevenson said last week the Senate proposal for extending the $8,000 tax credit for new homebuyers will have a "limited impact" on home sales.

A Senate committee reached a deal Wednesday to extend the $8,000 tax credit and offer a smaller $6,500 credit for some existing homeowners.

The main pitfall of the proposal is that it pushes back the expiration of the tax credit only to the end of April, Stevenson said. It is currently set to go away on Dec. 1.

Stevenson said he's skeptical the tax credit will drive activity during the slower winter months. The prime selling season for the housing market kicks off in the spring and tends to run through the warmer months.

"Of course, Congress could come back and extend it again," the analyst said. "When the next selling season starts, the housing market will depend on the state of the economy and mortgage rates, rather than tax credits."

The $6,500 credit for some repeat homebuyers would let more buyers participate albeit at a lower level, "but a lot of those people are effectively trapped in their current homes," Stevenson said.

From their peak in 2006, U.S. home prices have fallen about 30 percent through the end of August during the housing downturn, according to the S&P/Case-Shiller home price index. More Americans are falling behind on their mortgage payments or losing their homes in the recession as job losses pile up. Rising foreclosures are another key worry.

Yet hopes that a recovery is in place were fueled by a report this week showing the fourth straight month of rising home prices.

Some attributed the tentative rebound to buyers rushing to cash in on the expiring $8,000 tax credit. The push to extend and expand the credit has been led by homebuilders, realtors and other groups connected to the housing market.

"Failure to act now could derail the fragile housing recovery even before it has time to take root," said Jerry Howard, president of the National Association of Home Builders, in a statement Wednesday urging Congress to stretch the tax credit. "The consequences would be devastating for both housing and the economy."

Howard said the tax credit has already helped create nearly 200,000 jobs, drive home sales, stem foreclosures and stabilize prices. Homebuilder stocks were up sharply Thursday in the wake of the news on the Senate compromise.

advertising

Still, some economists say the incentive's impact is overblown.

"I am not applying the recent home-price rebound to the tax credit," said Cameron Findlay, chief economist at LendingTree.

"I don't think the tax credit makes as big an impact as people make it out to be, although it certainly motivates first-time buyers," he said. "If it expires, I don't think it would shake the housing market as much as some have predicted."

The compromise on extending the tax credit doesn't mean it's a sure thing, and the proposal would still face votes in Congress. One potential snag is a recent government report that uncovered fraud and abuse associated with the tax credit. Thousands of ineligible taxpayers have received millions of dollars under the program, according to the report.

Stephen East, an analyst at Pali Research, said the proposed new $6,500 credit would likely have some impact on the lower-end of the move-up market.

"In essence, this could slowly start to prime the pump," East forecast. "That said, we remain wary that any measurable impact will be seen until after the holidays and investors need to reconcile their expectations to that."

E-mail E-mail article      Print Print view      Share Share

More Real Estate

A rooftop view of Seattle-area real estate in 2009

Nation's Housing: More refinancing homeowners put cash in, not take it out

Getting the most cash back from your green home

Mortgage markets brace for future without federal aid

Fannie, Freddie regulator to offer housing goals soon

More Real Estate headlines...

No comments have been posted to this article. Start the conversation.


Get home delivery today!

Video

Advertising

AP Video

Entertainment | Top Video | World | Offbeat Video | Sci-Tech

Marketplace

Open Houses

Find this weekend's open house listings.
Or search by location:

nwautos

Fatal crashes are down in Washington, and a national used-car database goes onlinenew
Associated Press Study: Fatal crashes down in Washington Last year Washington's roads were the scene of the fewest fatal crashes since 1955. According...
Post a comment

 
Most read
Most commented
Most e-mailed
 
 

Most viewed imagesMore

Advertising