The bell tolled on the first-time homebuyers federal tax credit program April 30.
At 11:59 p.m. CDT, to be exact.
To spur the nation’s moribund housing market, the federal government dangled a tax credit worth up to $8,000 for first-time homebuyers and up to $6,500 for those who already owned homes. To collect the credit, the buyer must have signed a contract on or before April 30 and close by June 30.
A past president of the Mississippi Association of Realtors, Lynette Praytor says the tax credit program served its purpose and has helped ignite the downtrodden real estate industry.
“The majority of home purchases in the last six months have been through the federal tax credit,” said Praytor, general manager of Crye-Leike Realty in Flowood. “For the past two years, (real estate agents) have been beaten down by the economy. Anything that helps home sales is great.”
The tax break seems to have boosted sales in Mississippi. Over 20,000 buyers have collected approximately $139.4 million in credits while taking advantage of the program, according to data from the Internal Revenue Service.
On the surface, the tax credit program appears to have resuscitated the floundering housing market. The original program, which targeted first-time buyers, was so successful when it began in 2009 that the feds extended it into this year, with all homebuyers able to take advantage.
Praytor says April home sales for Creye-Leike were up by 14 percent from last year.
But real estate experts wonder what comes next. Now that the federal tax incentive is gone, many in the industry fear sales will slump.
One local Realtor says she’s sold more houses in the first four months of 2010 than she did all of last year but is concerned for the future.
“I’m worried and kind of scared for the rest of the year,” said Madison Realtor Lisa Ryan. “Since May 1, I haven’t shown one house or received a single call about any of my listings. Sure, it’s been great for our industry and the buyers and sellers, but not so great for the taxpayers.”
Ryan adds that she still has four contracts on homes that need to close before the June 30 deadline.
Former Jackson area Realtor Kami Levern, who spent more than 25 years in the real estate industry, says she sees both sides of the tax credit equation but remains wary of Uncle Sam dabbling in the homebuyers market.
“The industry was at a place of stagnation and locally, I know my contacts in real estate say the program has been a catalyst,” Levern said. “But government getting involved in business…I’ve read that for every $8,000 tax credit, it cost the taxpayers $40,000.“
Last year, more than 700,000 nationwide were able to buy their first home with assistance from the Recovery Act expansion of the first-time homebuyer tax credit. Overall, nearly 1.8 million taxpayers have collected $12.6 billion in tax credits to purchase a home.
The Recovery Act expanded the tax credit by increasing the credit amount to $8,000 for purchases made before Dec. 1, 2009. The Worker, Homeownership and Business Assistance Act, which became law last November, extended the deadline and expanded eligibility.
Although some are asking Congress for yet another extension of the tax credit, it’s not likely, given the cost of the program. The U.S Treasury reports that through March 27, the program cost American taxpayers almost $16 billion. With the frenzy of last-minute homebuyers to beat the April 30 deadline, the final cost could be considerably higher.
Unlike federal government bailouts for the banking and automotive industries, Praytor says taxpayer dollars utilized for the tax credit program were wisely spent.
“Just think, the first-time homebuyer will be paying taxes on that property they just bought,” she said. “People don’t pay taxes on rentals.”
Now that it’s over, the tax credit program is hardly a distant memory.
National real estate company Coldwell Banker launched its national “Buyer Bonus” program the first week of May. Homeowners are offered a 3 percent credit on the home’s purchase price — up to a maximum of $8,000 — at the time of closing.
Running through July 31, the program involves the sellers for providing the credit. So far, about seven out of 10 Coldwell Banker franchises have signed up for the program and are actively talking to sellers about it.
For Ryan, who has been involved in real estate for 14 years, the future, post-federal tax credit program, is uncertain.
“It’s a temporary fix, and I’m afraid now that things are going to slow down drastically,” she said.
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