As the home buyer tax credit is set to expire very soon, many are wondering if the credit will be extended again. Earlier in the year, proponents have pointed to increased home sales as a direct result of the home buyer tax credit. However, a a Wall Street Journal article (blogs.wsj.com/developments/2010/03/18/has-the-home-buyer-tax-credit-extension-flopped) points to a recently revised Fannie Mae 2010 housing forecast that indicates the current home buyer tax credit has not been as effective as the credit in 2009.
Fannie Mae’s “March Economic Developments” states:
“There are many reasons why we believe the second tax credit will be much less effective than the first. The 2009 first-time homebuyer tax credit may have dried up the pool of qualified first-time homebuyers. In addition, while the tax credit was extended to cover repeat buyers, the amount of the credit was smaller than that for first-time homebuyers. The tax incentives may not be enough to induce many homeowners to move, given that current homeowners generally must incur commission costs to sell their current homes, a cost not incurred by first-time homebuyers.”
Although there is doubt over the federal home buyer tax credit, states like California that have been hit hard by foreclosures are offering home buyer incentives. Yesterday, Governor Schwarzenegger signed into law yesterday the extension and expansion of the California home buyer tax credit, commenting that the credit is expected to stimulate the economy and put many of the vacant homes back “on the tax role.” Now California home buyers can take advantage of a California tax credit of $10,000 for the purchase of a new home or their first home until December 31, 2010.
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by Dan Krell © 2010