New Mexico real estate and home building officials cheered lawmakers Thursday for extending and expanding a homebuyers tax credit, expressing hope that the big boost in business the past few months will continue into the spring.
With the program due to expire at the end of this month, the House voted to extend the tax credit of up to $8,000 for first-time buyers, or to anyone who hasn’t owned a home in the last three years.
The lawmakers also expanded it to include buyers who have owned their current homes at least five years. They would be eligible for tax credits of up to $6,500.
To qualify, homebuyers in both groups have to sign a purchase agreement by April 30, and close by June 30.
The measure passed the Senate by a 98-0 vote earlier this week and by 403-12 margin in the House on Thursday. President Obama said he planned to sign it into law today.
Nationwide, about 1.4 million first-time homebuyers qualified for the credit through August. The National Association of Realtors estimates that 350,000 of them would not have purchased their homes without the credit.
Local experts applauded the decision to extend and expand the program, calling it terrific news for homebuyers and builders.
“So far, (the tax credit) has worked as far as what the objective was in the stimulus,” said Don Padilla, chairman of the Greater Albuquerque Association of Realtors, attributing as much as 30 percent of the sales in Albuquerque and around the nation this year to the measure. “It’s probably going to be much more successful because it’s being expanded to non-first time buyers out there. It’s like having a sale in a buyer’s market.”
“The big thing it is going to help not only locally, but nationally, are the builders,” Padilla added. “… It’s the residential real estate market that is the first component that creates jobs and that will create more jobs.”
Jim Folkman of the Home Builders Association of Central New Mexico said there is “no question” the original tax credit has had a positive effect on the Albuquerque area.
Housing starts for the first two quarters of the year in the Albuquerque area were down about 22 percent from a year ago, but third-quarter starts were up 23 percent, coinciding with the time the effects of the tax credit started being felt, he said.
While the latest measure should have a “very stimulant” effect on new construction, it will also helps free up additional inventory for first-time buyers by allowing people who already own homes to move up, Folkman said.
That could mean more work for others, such as smaller custom home builders, said David Murphy of SalesTraq of New Mexico.
“It’s keeping more builders from going under that otherwise either would have left the market or not been able to make it,” he said.
Murphy, though, said he has some reservations about the long-term effects of the tax credits on the country.
“The housing tax credit is great for right now,” he said. “But how are we going to make up the difference? How are we going to recoup the investment down the road?”
Extending and expanding the tax credit for homebuyers is projected to cost the government about $10.8 billion in lost taxes.
U.S. Sen. Kit Bond, R-Mo., questioned its efficiency in stimulating home sales.
“For the vast majority of cases, the homebuyer tax credit amounted to a free gift since it did not affect their decision to purchase a home,” Bond said. “And for the small minority of buyers whose decision was directly caused by the credit, this raises the question of whether we are subsidizing buyers who may not have been able to afford buying a home in the first place.”
The credit is available for the purchase of principal homes costing $800,000 or less, meaning vacation homes are ineligible. The credit would be phased out for individuals with annual incomes above $125,000 and for joint filers with incomes above $225,000.
The credit would be extended an additional year, until June 30, 2011, for members of the military serving outside the United States for at least 90 days.
The Associated Press contributed to this report.
By Michael Hartranft
Journal Staff Writer