Realtors Issue Call To Action to Extend $8,000 First Time Home Buyer Tax Credit

(MoneyWatch)  When the going gets tough, the National Association of Realtors contacts its million-plus members and encourages them to get going.

That's what happened yesterday, as the Realtors put up a video encouraging its member real estate agents and brokers to contact their Congressional representatives demanding an extension of the $8,000 first time home buyer tax credit.

The accompanying form letter (ready to be filled in online and sent) states that the current $8,000 first-time home buyer tax credit "has definitely been a success. Homebuyer interest and housing sales increased almost as soon as the ink was dry..."

But, the letter warns, time is running out.

"A home buyer is eligible for the tax credit only if the home is 'purchased' before December 1, 2009. That means that buyers have to find a house, complete a contract, satisfy any contingencies, secure financing and go to closing by November 30. Accomplishing those tasks by November 30 will become more difficult with every passing day. In today's market, it generally takes between 45 and 60 days to go from contract to closing."

In other words, if you haven't found a house to buy, and negotiated the contract by September 30 - just 14 days from now - you'll probably be out of luck.

The Realtors say that if Congress doesn't act "NOW" to extend the credit, the housing market could freeze - "possibly as soon as October."

While I sometimes think Realtors overstate the case, they're right about this - it's time to put up or shut up.

While I think that the $8,000 first time home buyer tax credit is mostly pushing sales from 2010 into 2009, there are probably a few new buyers who were encouraged by the tax credit to jump off the fence and buy something.

But the upper end of the market and the trade-up buyers haven't really returned. That's why Sen. Johnny Isakson (R-Ga) wants to increase the tax credit to $15,000 and make it available to everyone.

If you extend the $8,000 tax credit through 2010 and expand it to all buyers, not just first-time buyers, you've essentially pushed sales forward two years. Will that get us over the hump of 2010? Will Realtors want more in 2011 if hyper-inflation rears its head?

What if Federal Reserve Chairman Ben Bernanke is right and the recovery will be so mild that the unemployment rate stays high for years. Will the Realtors demand another band-aid then?

What this shows you is how unstable the real estate and mortgage finance industries are at the moment.

If the government wasn't standing behind 90 percent of the mortgages being issued (through Fannie Mae, Freddie Mac, FHA, USDA, etc.), and then buying the securitized paper, who would? It's not as if the world has a big appetite for bonds collateralized by U.S. mortgages at the moment.

The question is, will Congress be willing to buck the strongest lobbying group in Washington and tell the Realtors it's time for the housing market to stand on its own two feet? Or, will we see them vote for an extension and expansion and not have to deal with the housing market until after the 2010 elections?

If you need a health care distraction, there's always real estate.

Read More:

• Jobs and Real Estate Still Tied Together
• $8,000 Tax Credit: What will happen to real estate when the first-time home buyer tax credit expires?
• $15,000 Home Buyer Tax Credit Gets Another Boost
• How About a $15,000 Tax Credit For All Home Buyers, Even Millionaires?