WASHINGTON — It's one of the biggest unknowns bugging would-be buyers of houses and condos this summer: Will Congress let the $8,000 nonrepayable tax credit for first-time purchasers expire as scheduled 14 weeks from now?
Or will the credit get a second life and be extended, taking pressure off buyers, realty agents and settlement companies?
That's an especially urgent matter if you're a buyer just starting to shop and you see entry-level prices bottoming out or rebounding in many local markets. The tax credit statute requires buyers to fully close on their purchases — not just be under contract — no later than Nov. 30. This doesn't leave a lot of leeway for people who haven't yet decided on a house and who haven't nailed down mortgage financing.
The whole process of negotiating offers, signing sales contracts, applying for a loan and completing the closing can easily extend for two months — or a lot longer if things get off track.
Given the rapidly approaching deadline, what's the likelihood that Congress will allow at least a little extra time? Here's a quick overview.
Though Congress is on its summer break, most members of the Senate and House use part of the August recess to meet with and listen to constituents in their home districts.
This year, the two biggest housing trade groups — the 1.2-million-member National Association of Realtors and the National Association of Home Builders — are spending the month mounting intense grass roots campaigns to make the case for extending the credit, and maybe even expanding it. The effort is targeted first at the districts of members of the two tax-writing committees — House Ways and Means and Senate Finance — but is expected to cover most other members as well, according to officials of the two groups.
Delegations of homebuilders and realty brokers already have begun descending on district offices, delivering what Jerry Howard, president and CEO of the builders association, calls "the hard economic facts" — the numbers of houses sold in each congressman's district that are attributable to the tax credit; the economic ripple effects on local businesses, manufacturers and service industries; new jobs and income; plus the additional tax revenues that all this activity will help produce for local governments.
On a national basis, according to economists at the National Association of Realtors, anywhere from 300,000 to 350,000 additional sales of houses will be stimulated this year by the credit. Each home sale generates about $63,000 in downstream "ripple effects," they say — sales of furnishings, appliances, lawn mowers, landscaping, renovation materials, moving expenses and so on.
If you accept the numbers — and some analysts consider them a stretch — this means the housing credit provides a powerful, immediate reaction. Failure to extend what may be one of the most effective pieces of the Obama administration's 2009 stimulus legislation would cost jobs, economic growth and tax revenues, the housing groups argue.
There are some early signs Congress may be getting the message. Bills are pending in both houses to extend the credit for another year. Senate Majority Leader Harry M. Reid, D-Nev., whose state has been among the worst hit by the housing bust, reportedly now favors an extension of the credit. He was quoted to that effect by the Las Vegas Sun on Aug. 5, adding, "It's something we can get done."
Sen. Chris Dodd, D-Conn., chairman of the Senate Banking Committee and in a tight race for re-election next year, is co-sponsoring a bill with Georgia Republican Johnny Isakson that would raise the credit amount to a maximum of $15,000. Meanwhile, both the Realtors and the builders are pushing not only for extension of the credit, but for broadening it to cover all home purchases in 2010.
But can any of this happen before the Nov. 30 deadline? The key complicating factor here is Congress' heavy load of higher-profile, pressing issues that will get attention before anything else in September and October: health care reform, climate change and energy, financial system regulatory reform and a new Consumer Financial Protection Agency, among others. On top of that, a tax credit extension would cost billions in lost revenues — a big negative when the federal budget deficit is already wallowing in record red-ink territory.
In the end, however, given the political economics of the housing credit, the odds favor some sort of extension. Don't bank on a bigger credit, however, or broadening the concept to cover all purchasers next year.
Ken Harney can be reached at email@example.com.