The clock is ticking for first-time homebuyers scrambling to take advantage of an $8,000 tax credit set to expire on Nov. 30 â€“ unless Congress decides to extend it. Last week, the White House said its economic team is evaluating the creditâ€™s impact on home sales and will make a recommendation to President Barack Obama.
The National Association of Realtors and the National Association of Home Builders have launched marketing campaigns touting the credit and have pushed Congress to keep it going. But some lawmakers are balking at the cost, which may hit $15 billion â€“ more than double the amount projected in Februaryâ€™s economic stimulus bill.
Unlike the home buyer tax credit Congress enacted in July of 2008, this allowance does not have to be repaid. The federal tax credit covers up to 10 percent of the home price, or up to $8,000, for first-time buyers. Combined with low mortgage rates and falling prices the incentive is drawing first-time buyers like Alisha Baeza, 30, and George Gonzalez, 29, of San Bernardino, Calif.
In June, Baeza used the tax credit to buy a three-bedroom, two-and-a half bath home with a pool for $248,000. She enlisted veteran Spellacy Associates realtor Alice Wilson, and a San Bernardino program aimed at first-time home buyers. City staffers helped Baeza save money, lower her debt and arrange for a down payment.
â€œI started thinking about buying a home almost two years ago and at the time I couldnâ€™t afford it,â€ recalled Baeza, a dietary manager at Saint Bernardino Hospital. Alice kept encouraging me - â€˜you need to be a home owner.â€™ Then she told me about the city program. It worked out great because they advanced the 20 percent down payment.
Baeza admits qualifying for a loan in the midst of a recession-caused credit crunch and wading through the mounds of required paperwork was no fun.
â€œIt was grueling â€“ but worth it. I say to young people - go do it.â€
Her boyfriend Gonzales, an anesthesia equipment technician, also saw his fortunes change after recently qualifying for a home loan.
â€œFive years ago I couldnâ€™t afforded a home. My credit wasnâ€™t that good and home prices were outrageous. I figured Iâ€™d never own property,â€ Gonzalez said. â€œWhen I got approved I jumped for joy, called Alisha and said come on letâ€™s go celebrate. Now I tell people go fix your credit, save some money and see what you qualify for.â€
Housing experts say first-time homebuyers snapped up three out of 10 homes sold in July. Thatâ€™s about 10 percent below the average for the previous six years, according to the National Association of Realtors.
Wilson said itâ€™s a new era in home buying and home sales will struggle to rebound without a tax credit extension.
â€œPrices and home values are falling, banks are holding on to their wallets and thereâ€™s not a lot of housing inventory out there. Thatâ€™s kept many would-be buyers on the sidelines,â€ she said.
She said with or without a tax break, consumers in this economy are looking for a bargain much like they are with retail sales and auto sales.
â€œBanks are being extra cautious, worried about the still-dire unemployment situation. The turn of the year isnâ€™t likely to yield much good news on the job front so I donâ€™t see a full-blown recovery on the horizon.â€
Realtor Jeanine Baeza, Aliceâ€™s daughter, said while the tax credit has succeeded in energizing buyers and helping clear a glut of lower-priced homes, including foreclosed properties that are dragging down home values, buyers expecting to find a plentiful home inventory will be disappointed.
â€œFor every decent home on the market â€“ there are at least four or five people sometimes more bidding on it. A home can fall out of escrow and a week later its back in â€“ with another buyer.â€ The problem is made worst said Jeanine because many banks are reluctant to put foreclosed properties back on the market. â€œSimply put, itâ€™s very hard out there.â€
The best approach is honesty said Alice Baeza.
â€œWe tell prospective buyers with bad credit and or unstable employment. Itâ€™s just not going to happen.â€
â€œThe good old days are behind us,â€ Jeanne Baeza said.
â€œGet your house in order before you dip your toes into the market. It's bitter medicine. Weâ€™re just praying people donâ€™t get discouraged.â€