First Time Buyer Tax Credit

The housing stimulus package is a milestone for first time homebuyers that will help provide a much needed extra boost to the housing industry in the form of a tax credit, as well as much-needed measures that will improve mortgage liquidity, foster refinancing of troubled loans, and expand the supply of affordable rental housing.

NAHB President Sandy Dunn, a builder from Point Pleasant, W.Va., said that the act is “vital to restore confidence and get housing and the economy moving again.”

The centerpiece is a temporary, $7,500 first-time home buyer tax credit for the purchase of any home. The tax credit can be used for homes purchased between April 9, 2008 and July 1, 2009. It is expected to spur home sales, eliminate excess inventory and bring otherwise qualified home buyers back into the market.

Other key elements of the bill include:

• FHA modernization. A revitalized FHA will get mortgage money flowing again.
• GSE reform. This will lower the cost of capital in housing markets and free up more funds for home purchases or to refinance troubled loans.
• Mortgage revenue bond program. Expanding this program will help strapped borrowers seeking to refinance their home loans.
• Low Income Housing Tax Credit. Enhancing this program will expand the supply of much-needed affordable rental housing.

“The tax credit is the best stimulative measure,” said Dunn. “It will shore up home prices and halt the downward spiral in the housing market.”

As first drafted, the tax credit was set to expire on April 1, 2009. At NAHB’s urging, Congress extended the expiration date through June 2009.

“Extending the credit an additional 90 days was important so that home buyers would have use of the credit during the critical 2009 spring and early summer buying season, when we believe the bulk of home purchases will occur,” said Dunn.

It is critical to get the word out about the tax credit to consumers right away.

NAHB immediately launched resources to help members understand the credit and promote it to consumers, including:

• A new consumer Web site, www.federalhousingtaxcredit.com that includes details and a set of comprehensive questions and answers about how the credit works and how first time homebuyers can take advantage of it.