Reporting from Washington — Could Congress' ambitious second round of home purchase tax credits -- especially the $6,500 repeat-buyer credit -- turn out to be lacking in terms of economic stimulus clout?
With the April 30 deadline to sign home purchase contracts for both the $8,000 first-time buyer credit and the $6,500 version looming, some real estate and building experts are concerned that fewer consumers may be motivated by the credits this spring than last fall.
The $6,500 credit, in particular, appears to be generating little buzz among shoppers. "I don't think most people have any idea about it, or just don't understand it. No one's talking about it," said Gloria J. Ruesch, a broker with N.P. Dodge Real Estate in Omaha.
Lawrence Yun, chief economist for the National Assn. of Realtors, said the repeat-buyer credit "may not be sufficient to really move people to list their houses for sale and buy another."
Yun estimates that upward of 2 million home purchase and sale transactions were stimulated in 2009 by the $8,000 first-time buyer tax credit. His initial projections were that as many as 1.5 million purchases could be triggered by the availability of the $6,500 credit for repeat buyers from late 2009 through mid-2010.
Both credits were designed by Congress and the Obama administration to stimulate new economic activity. The $8,000 credit is intended for people who haven't owned a home in the last three years who sign up to buy one by April 30 and close by June 30.
The repeat-buyer credit was added to last fall's economic stimulus tax legislation. It offered what some critics saw as free money -- up to a $6,500 check from the government for purchasing a replacement residence that you had intended to buy anyway. To qualify, buyers must have lived in and owned their house for a consecutive five of the preceding eight years, and must meet income and home price criteria.
The tight timetable, plus the relatively small amount of the credit compared with the costs of transactions, may have damped interest in the repeat-buyer credit from the start. Leslie Tyler, vice president of marketing for Zip Realty, a brokerage based in Emeryville, Calif., and active in 35 metropolitan areas around the country, said the cost-benefit equation wasn't favorable for most potential users.
"It's not a big motivator" for several reasons, she said. First, in high- and moderate-cost markets alike, the prospect of receiving $6,500 from the government is not likely to persuade many longtime owners to suddenly go out home shopping.
Second, for underwater homeowners -- whose loan balances exceed their homes' sale value -- moving up or out may not be an option. Other owners find the sale price they are likely to receive discouraging, and they prefer to wait for a more propitious time to sell.
On the other hand, brokers and builders say the $8,000 tax credit appears to be motivating many first-time buyers to sign up by the April 30 deadline. Home builder Dean Mon of the DR Mon Group in Shrewsbury, N.J., said he had sold 60 houses in the $180,000 to $190,000 range in one project recently, with most purchasers at least partly motivated by the $8,000 credit.
Distributed by Washington Post Writers Group.