Congress Passes, President Signs Federal Stimulus Legislation
NAHB officials are hopeful a major housing stimulus package passed by Congress and signed by President Bush in July will help the industry recover from significant downturns during the past two years. The centerpiece of the Housing and Economic Recovery Act of 2008 is a $7,500 tax credit for first-time buyers, according to NAHB president Sandy Dunn.
“This is a real shot in the arm to first-time buyers as well as the entire building industry,” said Richard Dugas, president and chief executive officer of Pulte Homes. The tax credit could be “the impetus that draws a lot of potential buyers down off the fence and into the market this year and next year.”
Unlike previous stimulus efforts, however, the current tax credit must be paid back to the government interest-free — over a 15-year period — or when the home is sold.
The program applies only to principal residences of first-time buyers, considered those who have been out of the housing market for at least three years. It applies to both new construction and previously owned homes purchased between April 9, 2008 and July 1, 2009. The credit is available to single taxpayers with incomes up to $75,000 annually or married couples with incomes up to $150,000.
“The qualifications are significant since more than 40 percent of buyers last year were first-time owners, accounting for more than 2 million homes,” said Rob Dietz, director of tax issues for NAHB. “Buyers who qualify for the credit will stimulate the market in part because they don’t have a home to sell, thus creating a multiplier effect on the market.”
“This program will not only help whittle down existing inventory, but it won’t put additional homes into the marketplace,” said Ed Brady, a builder with projects in five areas of central Illinois. Brady said inventory backlog is the biggest issue facing builders.
“We have too much inventory … and affordability has decreased over the last couple of years,” he added, calling the situation a double overhang.
This isn’t the first time Congress has taken such a step. A similar tax credit of $2,000 approved in 1975 applied strictly to new homes purchased during a nine-month period.
"The credit helped clear off a then-record number of unsold homes off the market and was an important tool in helping the economy dig its way out of a recession,” Dunn said. “It worked before; we expect similar success this time.”
In addition to the tax credit, the legislation addresses FHA revitalization, foreclosure relief, government sponsored enterprise reform, a mortgage revenue bond program and low-income housing tax credit. But the first-time buyer tax credit is the key, officials said.
More information about the legislation is available at www.federalhousingtaxcredit.com.
-- Greg Robertson