After nearly two years of a downturn in the real estate market many people are hoping that the House and Senate will expand the tax credit to some existing homeowners and  extend the $8,000 tax credit for first-time home buyers until spring of next year. 

However, as of the writing of this post we don’t know yet what will happen.

We do know what has happened.  What has happened is that studies indicate that about 400,000 people bought a home and took advantage of of the tax credit.  Which sounds wonderful until you get to the bottom line where it has cost the tax payers over $30,000 for each home sold. Personally makes me wonder if this really is a good thing after all.  I think there is an argument that the free market could recover on it’s own.

None the less there are more plans on the table for the tax credit in a hope to be more inclusive and freeing up some credit for consumers.  While the uncertainty whether the extension will really pass remains in the air, the Senate is contemplating offering a new credit up to $6,500 for some existing home owners.  This new tax credit could be available to all home buyers who have been in their current home for a consecutive five-year period in the past eight years.

Being a devils advocate, I have to wonder how much this could help, because this does not allow those that purchased a home during the real estate boom to qualify.  Many people did purchase between 2004-2005.   In many cases this would mean if you did not jump on the real estate bandwagon then, you could be eligible for a tax credit if you did now.  For some reason this logic leaves me scratching my head.

Yes, I would agree, the real estate market has gotten  better since last year.  However, I am still seeing a decrease in Lynchburg area step-up home sales and the  Lynchburg real estate market for homes priced over $25o,ooo in this area than in the past.    Including current homeowners with the tax credit could be motivation for some homeowners that would not otherwise consider selling and buying another home, maybe.  I have my doubts though.

Washington has also discussed raising the income limits for the extension to $125,000 for single tax payers and $250,000 for joint taxpayers.  This would make the bill more inclusive.  The current plan being discussed and may be adopted states that purchase agreements must be ratified by April 30, 2010 and must go to settlement by June 30, 2010.

The vote still faces the full Senate and the House.  There is speculation that they may have a final vote by the end of the week.  No one knows if the extension will come to pass and even if it does who is to say this is what propels the real estate market forward.

I don’t mean to sound negative however, I think it will take more than a tax credit.  I also think people need to feel more secure in their jobs and more confidence in our economy.  Unemployment is still at a high.  Until unemployment  is on the way back down I don’t see people moving around a lot in this area. We may see some and this may help a bit. But as soon as I say that, on the flip side, I am reminded of the tax revenue that is not being generated as a result.  Remember Lynchburger’s are historically very conservative and slower to move than larger metropolitan areas.  What is your take?  Do you agree or disagree?