Latest Update Feb 11, 7:00pm – Reader hagfish digs this up from Bloomberg (Thanks hagfish!):
Bloomberg reports the proposed $15,000 tax credit for homebuyers was reduced to $8,000 according to Senate Finance Committee Chairman Max Baucus, a Montana Democrat. No details on whether the credit is refundable, repayable, limited to first-time buyers, etc.
And this was just printed about 30 minutes ago (10:25pm MST) in the LA Times:
First-time home buyers could qualify for an $8,000 tax credit.
The credit is slightly larger than the $7,500 credit in existing law, but it is substantially less than a proposal in the Senate bill that would have boosted the credit to $15,000 and broadened the eligibility.
In addition, the compromise bill waives a requirement that the tax credit be repaid. The credit applies only to homes bought between Jan. 1 and Aug. 31 of this year.
Homeowners who install new doors, windows or furnaces to make their home more energy efficient would be able to get as much as $1,500 back through new tax breaks.
Various news agencies are reporting the bill may be signed into law as early as Friday.
— ORIGINAL POST FOLLOWS —
The $15K home buyer’s tax credit has apparently been removed from the stimulus bill. Some reports are coming in that the Compromise Committee has stripped all of the $15,ooo tax cut provisions from the bill that will now be voted on by the House and Senate and sent to President Obama for signature, probably by week’s end.
Working to accommodate the new, lower overall limit of the bill, negotiators effectively wiped out a Senate-passed provision for a new $15,000 tax credit to defray the cost of buying a home, these officials said.
It’s now 12:51pm MST and I’m listening live on FOX News to Senator Harry Reid, (D-NV) Senate Majority Leader announce a $789 billion compromise on the stimulus bill has been reached, but there is no substance as to what has been cut and what remains.
As best I can tell, the currently existing $7,500 tax "credit” for first time home buyers is not affected by this act. It remains as is (and it is really a zero interest loan, not a tax credit). More info on the $7,500 first time home buyer incentive is available at the IRS. We’ll need to get a look at the final compromise to know for sure.
I am so-not-a-fan of big government nor of the tax system in general. But if one is to believe what we’re hearing from Washington, we are teetering on the brink of a depression (and a total economic collapse if you believe what some are saying). To gut the “Stimulus” package of the one thing in it that might have helped kick start the real estate market makes no sense to me. Was it a perfect solution? Of course not. But the next time I hear some politico spouting “We’ve got to do SOMETHING! We can’t just stand by and watch!” I think I’m just going to unplug my TV and Internet connection.
Update: This whole thing is, of course, not quite over. Recall your High School civics class — the compromise bill still has to pass both houses of Congress and be signed into law. With the three Senate “Republicans” that crossed over and voted with the Democrats in the group that worked out the compromise, passage is all but assured. What we do not know is exactly what is in the bill. As soon as it’s made public, I’ll post it here on the blog.
Reuters is reporting that a smaller $7,500 credit may be in the compromised bill. And confusion will reign supreme once again. There already is an existing law providing first time buyers a $7,500 “tax credit” that is in fact an interest free loan. The original House version of the Stimulus bill repealed the requirement for that credit to be repaid, turning it into a true tax credit. I’m not even going to speculate what, if, or how this compromise bill will affect that, or create a new $7,500 credit. Because until we lay eyes on the text of the passed bill, speculation is all it will be.
Stay tuned…. 
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Good update Jay. I agree…I find it baffling that they will pull a tax rebate, but not free money to projects, initiatives and special interest groups.
Well, I guess I don’t really find it that baffling…
Is there anything that the government can NOT screw up?
First it was the WSJ leaking that the Fed was considering 4.5% mortgages.
Next Obama says 4% mortgages are worth looking into
Now the senate shoots off their mouth about $15,000 that has a snowball’s chance in hell of passing!
Each failure to deliver brings more negative to a housing market that already has the deck stacked against it. If you are not a part of the solution you are part of the problem Mr. Politician.
It’s not really dead until the pared-down stimulus is approved in both Houses of legislature. My guess is that the Senate as a whole (not the negotiators) will have a hard time passing a substantially different bill than the one they supported the first time around. My guess is this is far from over. Thank you for this blog which keeps us up to date!
Thanks for the update. It is so hard to keep up with all of this stimulus stuff as it appears to be changing daily. I agree with you Jay. Watching or reading the news about the economy is pretty depressing. It would be better to just turn off the TV and internet.
Today is my first visit to your site – the minute by minute Twitter updates got me here.
You really should limit that TV news dosage.
Regardless, thanks for your timely reporting.
The comments already speak volumes for the severe frustration that we are all feeling.
Nice site. Nice Wordpress theme and utilities!
**Lee Taylor´s last blog post..My First Blog Post
@John – I wish I shared your optimism. Given that the three “Republicans” who voted for the first version were in on the compromise negotiations and I just can’t see any Dems bailing out across the aisle, the Senate has the 60 votes they need for a 3/5’s majority that can effectively stifle any Republican opposition.
I think the vote for the compromise bill will go down exactly like it did for the original — 61 -37. And with an overwhelming Democrat majority in the House, it should sail there too…
What will be interesting will be to hear how they spin the blame when it fails. Somehow it’ll be the Repub’s fault even though they didn’t vote for it.
Why bother continuing to give the banks money, if the people they are supposed to lend it to, don’t get any tax credits of enough significance to borrow?
I was one of the many that was seriously pondering buying a home during 2009 with the aid of the tax credits that were being discussed. I wouldn’t have been able to take advantage of the entire $15k package because I don’t make enough money, but the $10k I could have gotten would have been enough to lure me off of the fence.
I just don’t get how you take two groups of individuals – the house that wanted to give home buyers $7500 refundable, and the senate that wanted to give home buyers $15k non refundable – and in the end prescribe a package that does nothing for home buyers.
It makes no sense to me, but then again, we are talking about the hacks that make up our government.
From CNN.com at 2:53pm 2/11/09
House, Senate announce deal on stimulus
The homeowner tax credit has been kept but significantly reduced. The Senate version proposed a $15,000 credit, double that of the House bill.
http://www.cnn.com/2009/POLITICS/02/11/stimulus.plan/index.html
http://tinyurl.com/latimesRE
Package is back down to $7500
Probably futile to comment until we know more, but from a societal view, I’m not sorry to see this credit go. While I think it could have had a significant short term effect on the housing market, it only extends the housing downturn which will ultimately last until home prices are in-line with incomes.
On a personal level, I’m sorry to see it go. I am the target of this program – one who very likely would have bought in 2009 if the program passed and almost certainly won’t without the incentive. Unless the dynamics of the Phoenix market change significantly, even a smaller incentive likely won’t do it. I ran the numbers for my situation, and even with the $15K, buying this year still entails a lot of risk.
Indeed now I’m even more resolute in waiting until 2011 or so, because given the attention and excitement that this provision of the bill generated, it is entirely possible that this program will reemerge in TARP III or TARP IV or even as a stand-alone bill.
Obviously this is the opposite of what the government wants, but is a perfect illustration of what is wrong with everything the government has done so far. They have no comprehensive plan. They haven’t set forth any rules or objectives. They haven’t explained how decisions are going to be made. They haven’t provided any vision to what the future will look like. And why would any rational person want to take a risk in this environment. Whether it’s somebody looking to buy a house, start a business, invest in bank stock or buy mortgage-backed-securities, you’re not betting on your ability to understand economics you’re betting on being able to guess what the government will do next on a whim.
If you’re like me without any inside information or a personal lobbyist you close the checkbook, hunker down and wait and see what happens.
@Raj said: “Package is back down to $7500″.
There is a key word in that article — “likely”. 24 hours ago it was “almost certain” it would be $15K. Now it’s “likely” to be $7.5.
I won’t believe anything until I see the language in the bill after it pass both the House and the Senate.
@Rich – well said. Very.
I ‘ll believe it when I see it pretty much sums it up. Personally I think it would have been good for the housing market and would have driven sales and everything else that follows when one buys a home.
I guess our industry lobbying efforts were not as good as some others.
Bloomberg reports the proposed $15,000 tax credit for homebuyers was reduced to $8,000 according to Senate Finance Committee Chairman Max Baucus, a Montana Democrat.
http://tinyurl.com/8000-credit
No details on whether the credit is refundable, repayable, limited to first-time buyers, etc.
Jay,
Can’t say I really thought this would survive. Would have been nice for my market as no income limit.
**Kaye Thomas´s last blog post..Manhattan Beach CA: Market Snapshot February 10, 2009
“What we do not know is exactly what is in the bill.”
have you checked here?
http://thomas.loc.gov/cgi-bin/query/D?c111:6:./temp/~c111GGVxqX::
though I’m not sure if its the *absolute final* version that will be voted on tomorrow/friday…
**ZedLoch´s last blog post..Been a while
Jay,
Thanks for keeping up with this thing – holy cow, it has more twists and turns than Tammy’s favorite chick-flicks.
As usual, even us “experts” look to you when people ask us “so, what is going on with that $15,000 tax credit thingy?”
And as I am buying time on the phone when someone asks me what is going on with it, I quickly log in to TPREG and see what the latest information is.
Keep it up, because even if no one else in the world reads this stuff (and we all know that they do) – I NEED THESE UPDATES OR PEOPLE WILL START TO THINK I DON’T KNOW WHAT I AM TALKING ABOUT!
Justin
**Justin McHood´s last blog post..Arizona FHA Loans: Home Repairs, Which Ones Are Required?
My husband and I are closing on Friday 2-13-09 on a new home we just built. We have a previous home so we are not first time home buyers. I need your advice!!! Should we postpone our closing or go through with everything considering what happened today? Will or have they changed to $7500 tax credit for everyone or still 1st time home buyers? Will this take place only for homes purchased after bill is signed or for homes purchased from 1-1-09?
Meghan – I’d postpone it if you can without a penalty until probably next Friday (we are doing something similiar).
At the very least, the current tax credit ($7,500 – refundable – must pay back) will continue to be the law, so there is really no benefit (IMO) in closing right now before we hear about the stimulus package details. I’d hate to tell you to close tomorrow and possibly miss out on a better deal next week.
My guess is that it’ll be the $8,000 Bloomberg is reporting, but it will be non-refundable, based on your tax liability, and spreadable over two years (Note: this is just my gut feeling, so I could definitely be wrong).
The earlier provisions made the “new” tax credit effective on the date it is signed into law – which probably won’t be tomorrow, but should be very soon. So I doubt it would be retroactive, because the purpose behind it is to motivate people to buy homes because of the nex tax credit. (Again, this is my opinion, not based on fact).
So, I’ve got a question…I’m looking to buy a home summer 2009 and I’m wondering if I were to wait to file my taxes until after this bill is finally voted on, if I’d be able to recognize the tax savings one year ahead of time. If the law allows you to claim a qualifying 2009 purchase on your 2008 return would the following be possible??
1. My tax paid to government in 2008 is approximately $6000.
2. Let’s assume that my tax liability is actually $5500.
3. Now, let’s assume the home purchase tax credit is $8000 and you may spread it over two years. In this case, you apply half of the credit to your 2008 return, lowering your tax liability by $4000.
4. In turn your tax liability is now $1500, and you should receive a refund of $4500 on your 2008 tax return.
Now in 2009, you have gotten to recognize 4 months (Sept-Dec) of tax savings from the purchase of your new home (close in August). These savings include the property tax deduction, the mortgage insurance premium deduction, and the tax savings associated with owning a home – they have lowered your tax liability to $4000.
1. Let’s say that you would prefer to recognize the benefit that would be associated with the home purchase tax credit on your 2009 tax return immediately.
2. You will lower the tax deduction from your paycheck to $0. This amounts to approximately $250 per paycheck extra money in your pocket. Now you will be paying $0 in taxes over the remainder of 2009.
3. Let’s assume you start this with the first pay date in April – Friday, April 3rd for most. That is 20 pay periods where you have an extra $250 in your pocket now, rather than waiting until tax return season – that’s $5000.
4. So now you are filing your 2009 tax return, you paid only $1500 (six pay periods from Jan thru March) out of your paychecks. As stated above, your tax liability was $4000 for 2009. Now comes the second half of your home purchase tax credit.
5. Subtract the remaining $4000 from your liability, and your tax liability becomes $0, and you get a refund of the $1500 you paid to the IRS thru the first three months of the year.
6. Add that $1500 to the $5000 savings you recognized from April to the end of the year, and you have a total tax savings of $6500 PLUS you have gotten to use the $5000 towards anything you’d like throughout the year rather than waiting for the money to arrive via tax refund in 2010.
Does this make sense, or am I bending the law? I am NOT a tax professional but I have read quite a few stimulus packages in the last year…any thoughts? Thanks! And good luck to anyone else looking to purchase a home this year!
And this was just printed about 30 minutes ago (10:25pm MST) in the LA Times:
First-time home buyers could qualify for an $8,000 tax credit.
The credit is slightly larger than the $7,500 credit in existing law, but it is substantially less than a proposal in the Senate bill that would have boosted the credit to $15,000 and broadened the eligibility.
In addition, the compromise bill waives a requirement that the tax credit be repaid. The credit applies only to homes bought between Jan. 1 and Aug. 31 of this year.
Homeowners who install new doors, windows or furnaces to make their home more energy efficient would be able to get as much as $1,500 back through new tax breaks.
thanks for this article interesting really.
No wonder this country is in such trouble. The leadership in the government is brain dead. I cannot believe they would lead on so much about the $15,000 tax credit which ever consumer in my area seems to know about and be waiting to see if it becomes reality, and then cut it. I think now that they cut it, it will actually hurt home sales further.
Talk about stupid people in the house.
**James Boyer´s last blog post..Chatham NJ Real Estate Update / January 2009
I dont understand how the $8000 first time home buyer credit now would be active only for “homes bought between Jan. 1 and Aug. 31 of this year,” when they had a $7500 “tax credit” (0% loan really) that applied for homes purchased 4/8/08 onward. I purchased my home 8/1/08. Does that mean I am not eligible for the new revised $8000 tax credit AND out the $7500 0% loan that was originally proposed? I’m confused if the $8000 is for homes purchased between 1/1/09-8/31/09 and the $7500 tax credit that needs to be repaid is for homes purchased 4/8/08-12/30/08?
Is this new $8000 credit only for 1st time home buyers?
@Karen in IL – welcome to the Confusion Club! Right now, the text of the revised bill hasn’t been publicly released, so anything I said would be pure speculation and probably just add to the confusion. The new bill’s language should be out today or tomorrow and then we’ll know a lot more about the new credit, and how the old, $7,500 “credit” will be handled.
OK well I guess no need to start rumors then
Let’s hope the bill is for the most people that can benefit which would NOT be just first time buyers (like myself!) I hope everyone can benefit as much as possible from the new bill and that they didnt get a lot of people’s hopes up for nothing.
Megan from Ohio asks: “Is this new $8000 credit only for 1st time home buyers?”
Depends on what news source you read! That’s a lousy answer, but I’ve seen major media outlets reporting it both ways. We should know soon when the verbiage of the bill itself is released and we don’t have to rely on reporters interpreting what various “officials” say.
The first time home buyer tax credit progam is a joke. 4,000 people applied for it, 114 got it and now have to pay it back every year: it had no impact. The Senate version would have made a huge impact with $15,000 tax credit, no payback, no income limit except on the price of the home. The Senate version would have drawn a lot of us who have large downpayments gathering dust in banks, perfect approved credit and waiting to buy but won’t because the home will continue to lose 15% value. Again, Congress fails by changing this to a $8,000 tax credit loan with income limits to first time homebuyers with small down payments who will only be able to take advantage of a partial portion of the $8,000. It didn’t work before so Congress wants to do it again. We will keep renting and wait rather than throw our money away.
Its interesting how quickly the tax credit went from $15K to $7500. I wonder if by time I am done writing this comment it has changed again!
That’s truly sad. I had a lot of faith in the 15K tax credit boosting real estate sales.
Rich said it all. Until home prices are in-line with incomes and lay-offs stop lingering over everyone’s heads, then nothing will be corrected. We will just have to wait and see.
**MaryAnn Knell-Peoria Real Estate´s last blog post..10 Steps to Achieving the American Dream of Home Ownership!
It does amaze me how the government is so adament about having to save banks and other industries with their bail out plan, but really things might end up settling more quickly if they would just stay out of it. And since they did bail out a lot of banks and other such places, it seems they really do have to now do what they can to help people feel confident in borrowing-like giving tax credits/breaks. Let’s see what happens…sigh.
nice.
How many first time home buyers are left in this country? With all of the loans given out within the last 5-6 years during the Seller’s Market a large portion of the population purchased a home.
**CashFlowCindy´s last blog post..Are you looking for a Cash Cow Business?
So now here we are a month or two later, the $8,000 tax credit is official… wondering if Realtor/readers of this site are seeing an effect on their sales?
On the Cincinnati MLS, we’re seeing that listings are up… and sales are up just a bit in Feb over Jan. People looking to buy a home seem to still be sitting by the sidelines, despite tax credits and low low low interest rates.
We need to look on the positive side of the stimulus. $8,000 is a substantial amount of money for a first time home buyer. Look it’s a vast amount of money for me! I am targeting this market to wholesale my houses.
**cashflowCindy´s last blog post..Real Estate Investing – How to Have the Government Pay Your Rent
I sure wish this money was available when my wife and I bought our first house 4 years ago. It has now lost about 1/3 of it’s value. We still love it (it’s an old house built in 1918 and has been well maintained), but just knowing we could buy the same house for 1/3 less AND have an $8,000 credit is a bit of a sting.
$8000 is still a great incentive for any first-time buyer to jump into the market. I wish I didn’t lose my first-time buyer status a few years back when the housing market was at the highest.
**taxforum´s last blog post..WHAT’S THE BUZZ? TELL ME WHAT’S A HAPPENNIN’ –
Do we think this $8000 will be extended past Dec 1.
It is helping the San Diego Market have a little bounce at the moment
**Simon White´s last blog post..Importance of Getting a Pre-Approval Before House Shopping
The RE agent drop in income story has other facets.Agents incomes are way down. The figures calculated are probably directionally correct overall. What makes things worse for the agents is that they're not doing 54% less work, or incurring 54% less out of pocket costs. Many pay for system access and certain RE related services out of pocket. With income reduced but expenses holding steady, the reduction in their net income is more pronounced. Many of these agents are also spending significant amounts of time and energy working on short sales. Few of these transactions end up closing and yielding commission $ as many banks are dragging their feet on dealing with problems. The only people who seem to have it worse are the spec builders. Many are being boiled alive as the problems they put off in 2008 by renting out unsold inventory are now snowballing into massive losses.
The RE agent drop in income story has other facets.Agents incomes are way down. The figures calculated are probably directionally correct overall. What makes things worse for the agents is that they're not doing 54% less work, or incurring 54% less out of pocket costs. Many pay for system access and certain RE related services out of pocket. With income reduced but expenses holding steady, the reduction in their net income is more pronounced. Many of these agents are also spending significant amounts of time and energy working on short sales. Few of these transactions end up closing and yielding commission $ as many banks are dragging their feet on dealing with problems. The only people who seem to have it worse are the spec builders. Many are being boiled alive as the problems they put off in 2008 by renting out unsold inventory are now snowballing into massive losses.
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