It looks like the $15,000 tax credit for all home buyers, even millionaires, is dead in the water.
But don't count Sen. Johnny Isakson (R-GA) out just yet. In a phone call this morning, he laid out plans for a $10,000 tax credit for all home buyers, one that removes the income cap and allows anyone to claim the tax credit as long as you live in the house for three years.
While it would be great to have a $10,000 tax credit for all home buyers, the recent good housing news seems to have taken out some of the steam behind extending and expanding the current $8,000 tax credit:
- Last month, housing prices climbed the most since 2005. The S&P/Case-Schiller Index of the top 20 housing markets showed prices climbed 1.2 percent in July.
- The Federal government plans to spend $35 billion over three years to fund state housing programs that target low-to-middle income home buyers.
- Interest rates remain at nearly 40-year lows, making housing extremely affordable.
- New housing starts rose 1.5 percent to their highest level since November, 2008. Mostly, multi-family housing starts accounted for the increase since housing starts for single-family homes fell 3 percent to an annual rate of 479,000 new homes, an extremely low number.
In terms of home prices, Sen. Isakson says we've "stabilized on the bottom." But, "single family construction is dead as a doornail."
And while 350,000 first-time home buyers have used the $8,000 tax credit, the housing market isn't suffering from a first-time buyer drought. It's move-up buyers who have taken a time-out - mostly because they can't sell their homes or are so burned out from the process that they've decided to rent instead of buy.
Sen. Isakson says if the Federal government doesn't extend and expand the tax credit by October 15th (his drop-dead date for being able to close on a home purchase by November 30, 2009, the day the tax credit expires - which I think it optimistic), "what little velocity we have in the market will go away at the worst time of the year. December to February are the worst three months of the year for real estate. You're going into the spring market with no strength in the marketplace," he explained.
As the only Realtor (a member of the National Association of Realtors) in the Senate, Isakson said he remembers how the housing market got crushed in previous recessions.
"I went through four recessions, in 1968, 1974, 1981 and 1991. In whole or in part, loose credit and shoddy underwriting were the cause of these recessions. We lost our bearing and in each of these recessions, the housing market took us into the recession and the housing market took us out. In a macro sense, when you look at what to stimulate, the housing market has proven time and again to stimulate the economy," Isakson said.
Up on Capitol Hill, the health care debate is sucking all the available oxygen out of the room. Just this afternoon, the Senate rejected the Public Option.
But Isakson plans to submit his $10,000 home buyer tax credit proposal as an amendment to one of several pieces of legislation scheduled to come up for a vote before October 12, 2009. He says he was just 4 votes short the last time his $15,000 tax credit legislation came up for a vote. He expects to have enough votes to get his pared-down $10,000 tax credit for all home buyers amendment passed.
The tax credit clock is ticking.