Senator Johnny Isakson
In a statement delivered on the Senate floor on Tuesday, October 13, 2009, United States Senator Johnny Isakson (R-Georgia) elaborated on his proposal, jointly sponsored with Senator Chris Dodd (D-Connecticut), to extend and expand the soon-to-expire Home Buyer Tax Credit. See full remarks: http://isakson.senate.gov/floor/2009/101309hbtc.htm
The Senator proposes extending the tax credit through June 30, 2010, eliminating the first-time buyer restriction, and increasing the income limits to $150,000 for an individual and $300,000 for a family, all before the current law expires on November 30, 2009.
He specifically addresses his concerns on the impact of housing demand on foreclosures: “Houses continue to decline in their value because the market demand is down. The foreclosures we see today are not subprime loans; they were the loans that were foreclosed on a year or a year and a half ago. When we read the addresses of these 1,157, which I won’t do, they are the addresses of mainstream America and the mortgages that are being foreclosed on are what are called conventional loans that were made to people who had jobs, had income sufficient to make the payments, and had downpayments of 5, 10, or 20 percent.”
He linked housing demand and the foreclosure rate: “The first-time home buyer tax credit is about to expire. What does that have to do with this foreclosure problem we have and the problem of declining values of houses and shrinking equities for the American people? It has everything to do with it. We have a great demonstration project in the first-time home buyer tax credit that shows this Congress the way to continue and get a recovery in our housing market. In the time the first-time home buyer tax credit has been in effect, it is estimated that 350,000 home sales were made. That is 357,000 sales that would not have taken place.”
And he specifically addressed the termination date of the current law: “So I would submit that when we look at the sunset date of November 30 on the first-time home buyer tax credit, we should extend it–not forever but through midyear next year, to the end of June 2010. There is a reason for that recommendation. The worst 3 months of the year in any housing market anywhere in the United States are December, January, and February because it is winter and because it is the holidays. So there is not much of a market to begin with in those 3 months. If this tax credit dies in November and then it dies the day before the declining market takes place, by the time the spring market comes back in March and April, it is too late and we will have a protracted period of even poorer sales than we have had recently. But if we pass and extend the credit through June 30 of next year, we continue to buoy the housing market around the country.”
He continued, tying the current recession to the collapse of the housing market: “It is very important that we stimulate and continue the existing stimulation of the housing market. The recession that began in December of 2007 began with a collapse of housing, first because of the subprime mortgage failures, but it continues to today, a continuing collapse, and the failures aren’t subprime, high-risk credits, they are mainstream America. There is a point in time when we owe it to our country, we owe it to our economy, we owe it to mainstream America, where we know we have a proven program that works, to extend it and buoy the marketplace.”
He ended his statement with a plea: “So I come to the floor today to ask everybody in the Senate to think about what is happening. Six weeks from now, the tax credit sunsets. When it fails, the market again will have downward depression on values, on sales, and most importantly on consumer confidence. Let’s try to slow down the rate of foreclosure. Let’s help Middle America, which right now faces difficult times. Let’s take them out of the newspaper and let’s take them back into a buoyant economy that has jobs, has growth, and has promise for the future.”
In summary, he added: “I submit that an extension of the first-time home buyer credit by removing the means test, raising the income limitation, and extending it to midyear is good for America, makes good sense for this Senate, and I hope we will find the time before the current bill sunsets to pass it and do it for America.”
We agree almost completely with the Senator, except for one, tiny but important flaw. The only criticism we would have is that the law should be extended for one year, to November 30th, 2010, instead of just to June 30th.
Senator Chris Dodd
The reason for this is that otherwise, the new law would only apply to existing homes and standing builder spec home inventory.
Anyone wanting to build a new home under the plan would be excluded because in most parts of the country, except for the
smallest homes, it typically takes 8-to-9 months from the date of signing a purchase agreement to complete the new home.
It doesn’t make sense to exclude this important sector of buyers, many of whom would participate in the move-up, custom home sector.
Housing 101 
It makes sense to extend the home buyer tax credit. Our housing market by no means has recovered, why pull the rug out from under a positive motivator now???
The long term benefits should outweigh the cost, especially when you factor in consumer confidence!
Judi,
Thanks for your comment. I couldn’t agree more, especially since NAHB estimates show that about 3/4 of the cost will be paid back just by the increase in economic activity and tax revenues generated by the program. It is almost free!
Rege
I would disagree. I am in the Midwest, hardest hit by the foreclosures in Ohio, and I am building a new custom home. I signed contract last week and we will be done in mid-February. And it’s a 3000 sq ft home with full basement, so not small by many standards. If they extend this till June, can they not see how it’s going in April and extend again if needed? I do not think they will ever pass a full year extension, but 6 months at a time is something that they would do……
Lynn,
My kudos to your builder. That is a very fast build time for a large custom home!
Problem is, it typically takes 8-to-9 months to build a new home. You need plans drawn, loan applications and appraisals, building permit applications. Generally it takes around 8 weeks, plus or minus, to get all that done before the home can even start. Then 4-to-6 months to actually build it, maybe more, depending on weather, the size of the home, and complications.
So what happens is, if there is no tax credit, a lot of folks will opt not to build because they couldn’t finish. Then if the feds came back in April and reinstated it, people would have to restart their buying process again, and they still might not make it.
So what you need is a long period of consistent policy so people can make and implement their decisions. From what I hear, you will probably be in a good position to get the tax because your home completion should fall into the time window when it will be valid.
Good luck!
Rege
Rege,
I guess I am lucky then…..permits, drawings, loan apps only took about 2 weeks. And my builder (and typical of those around here), it takes 90 days to complete but they plan on 120 for any complications, especially mine since I am the first to get geothermal heat. They are under roof in 10 days here after that, you won’t have weather issues. BUT with that said, any starting in about 30 days could run into weather delays.
I hope to be able to use the credit but only can if they drop the first time home buyer qualification. Even without it, I would have still purchased. Just makes the $50K loss in the last year on my current home a little more palitable…….at least I do get to take advantage of the geothermal 30% credit anyway….a big seller in my new home. We would not have built without the builder doing that for us.
With that said, had the credit been for everyone, we would have jumped off the fence sooner to sell ours and build a new one. So, while we are not building because of the credit, it would have put us into the game sooner had it been there for us a year ago. With the first time homes becoming harder to find, the home market needs people like me to move out of those starter homes. I like that with dropping the first time home buyer qualification, more of the housing market will be moving, not just the lower end of the market……
(And if anyone is in the market for a new home in the Ohio/Kentucky/Indiana area, Maple Street Homes, division of Fischer Homes is building my home……)
Lynn,
Nothing is guaranteed, but it seems like there is a good chance that you will be able to get the tax credit. Keep your fingers crossed. 🙂
Rege