Make us your home page
Instagram

Shrink first-time home buyer tax credit, expand program to investors

President Barack Obama's signature this morning would extend and expand the $8,000 first-time home buyer tax credit when it expires after Nov. 30.

That would mean that an incentive that first applied to home purchases in April 2008 — albeit at a less generous $7,500 — will stretch well into 2010.

The National Association of Realtors wanted the credit to rise to $15,000, but I think the better question is why the credit isn't smaller.

Between April 2008 and September 2009, the median Tampa Bay home price dipped 22 percent. That means that over the past 18 months, the credit is covering a larger chunk of a typical home's purchase price.

Based on September's median home price of $137,800, the tax credit paid 5.8 percent of the price of a home. Back in April 2008, the $7,500 tax credit covered 4.3 percent of the cost of typical Tampa Bay home worth $176,000. The credit's buying power has swollen by about a third.

My advice to the powers-that-be is simple: Shrink the credit by $1,500, and use the rest to let real estate investors tap the money. The first idea is mine; the second comes from national housing economist Mark Zandi.

Sacrilege, you'll say. Investors are the greedy bums who brought the wrath of the housing gods on our heads. The way I see it, by encouraging investors to buy homes next year, we're handing a mop to the slobs who tracked mud on the floor tile: It's your mess, you clean it up.

Zandi argues that foreclosures, despite a recent flattening of their two-year upward trajectory, will take flight again in the first half of 2010. Who's going to sponge up those thousands of excess houses? Certainly not the 11 percent of Floridians out of work.

It's not that extravagant a step. Washington has already conceded that the credit should apply to more than just first-time home buyers. For next year, there's also a lesser, $6,500 credit for homeowners who want to move. But it slipped in an anti-speculator provision: You have to have lived in your current home at least five years. Flippers need not apply.

It's no one's intention to reinflate the housing bubble. Limit each investor to using the credit once or twice. The cost? So far this year, about 1.4 million home buyers have tapped the $8,000 credit. (About 100,000 of those transactions could be fraudulent, the Internal Revenue Service said.)

That's $11.2 billion worth of credits. By reducing the $8,000 to $6,500 across the board, we would have saved $2.1 billion, enough to subsidize 323,000 more home sales.

When you consider that Tampa Bay's housing surplus falls somewhere in the 10,000-to-15,000 range, spreading the credit more thinly, but to a wider range of buyers, could make a wealth of difference.

James Thorner can be reached at jthorner@sptimes.com or (813) 226-3313.

.Fast facts

Who gets what?

With the first-time home buyer tax credit scheduled to expire, Congress voted to extend it into the spring — and to expand it to many people who already own homes:

• Buyers who have owned their current homes at least five years would be eligible, subject to income limits, for tax credits of up to $6,500.

• First-time home buyers — or people who haven't owned homes in the previous three years — could get up to $8,000. To qualify, buyers have to sign purchase agreements before May 1 and close before July 1.

Times wires

Shrink first-time home buyer tax credit, expand program to investors 11/05/09 [Last modified: Thursday, November 5, 2009 9:03pm]
Photo reprints | Article reprints

© 2017 Tampa Bay Times

    

Join the discussion: Click to view comments, add yours

Loading...
  1. Tampa man pleads guilty to forging check for fake investment

    Personal Finance

    A Tampa resident was convicted Thursday for forging a check for a fake investment. The Florida Office of Financial Regulation said that Eric Franz Peer pleaded guilty. He served 11 months in jail and will have to pay $18,000.

  2. Minority business accelerator launch by Tampa chamber to aid black, Hispanic businesses

    Business

    A "minority business accelerator" program was launched Thursday by the Greater Tampa Chamber of Commerce geared toward helping black and Hispanic business owners identify and overcome barriers to grow their companies. The accelerator, known as MBA, will provide participants with business tools to cultivate opportunities …

    Bemetra Simmons is a senior private banker at Wells Fargo, The Private Bank. She is also chair of the new minority business accelerator program for the Greater Tampa Chamber of Commerce. [Photo, LinkedIn]
  3. Terrier Tri brings unique triathlon training to South Tampa

    Business

    Over a decade ago, Robert Pennino traded late nights in the music studio for early mornings in the Terrier Tri cycle studio.

    Terrier Tri, a cycling studio in South Tampa celebrates a grand opening on June 27. Photo courtesy of Tess Hipp.
  4. New bistro hopes to serve as 'adult Chuck E. Cheese'

    Business

    YBOR CITY — Inside Cheezy's Bistro and Speakeasy, a new restaurant opening in Ybor City, customers will find a mix of family recipes, games and secrecy.

    Cheezy's Bistro and Speakeasy readies to open in Ybor City. Photo courtesy of Cheezy's Bistro and Speakeasy.
  5. Ramadan having an economic impact on local charities, businesses

    Economic Development

    TAMPA — Dodging the rain, a few families and customers gathered inside Petra Restaurant on Busch Boulevard. Around 8:30 p.m., the adham (or call to prayer) music begins, signaling Iftar, the end of the daily fast. Customers grabbed a plate to dig into the feast.

    Baha Abdullah, 35, the owner of the Sultan Market makes kataif, a common dessert that is eaten during the month long celebration of Ramadan in Tampa. [OCTAVIO JONES   |   Times]