Spring is usually the peak season for home buying. But this year is different.
Real estate agents say that when Congress decided in February to create an $8,000 tax credit for first-time homebuyers — and set a Nov. 30 deadline — it turned August into the new real-estate rush hour. Because a sales contract can take months to complete, buyers are turning out in droves this month to ensure they make the deadline.
"It's having a big impact," said Iverson Moore, a spokesman for the National Association of Realtors.
The trade group is collecting data to measure just how big the impact is.
"We are hearing ... that a large share of first-time buyers are being motivated by the tax credit," Moore said.
To qualify, buyers must be purchasing a principle residence for the first time or at least for the first time after at least three years of renting. To keep the focus on first-time buyers, Congress set an income limit for the full credit. For a single person, it's $75,000 and for married couples, it's double that.
Just like the "Cash for Clunkers" program that helped the auto industry, the homebuyer tax credit is helping turn around the housing market. Moore's group said this past week that the number of contracts to buy previously owned homes rose in June for a fifth straight month.
Buyers will get the money when they claim the tax credit while filing their federal income taxes for 2009. So, for example, a person who normally would owe $8,000 in federal income taxes would owe no taxes at all after taking the credit. Even those who owe little or no federal tax can get the credit. The government will send them a check for a portion or all of the credit.
The credit is equal to 10 percent of the home's price, up to $8,000. So, for example, if a buyer is paying $50,000 for a house, the credit would be worth $5,000. The tax credit never has to be repaid. Last year, Congress created a different tax credit, but that one was effectively an interest-free loan. This money involves no repayment or interest.
Some members of Congress want to extend the credit. Last month, the National Association of Realtors testified before the House, saying the program has been so successful, it needs to be extended through next year. A bill has been introduced to stretch the tax credit through 2010 and has attracted almost two dozen sponsors.
Meredith Salsbery, a spokeswoman for Rep. Tim Walz, a Democrat from Minnesota, said that in recent days, the lawmaker has met with Realtors, home builders and constituents in his district who are calling for an extension of the program. "We're working on it," she said. Walz is a co-sponsor of the First-Time Homebuyer Credit Extension Act of 2009, HR 1933.
Realtors' spokeswoman Mary Trupo said chances for passage are unclear because of congressional concerns about the growing federal budget deficit.
"Some members of Congress are receptive, but there's a lot of work to be done to extend the credit," she said. "We don't know what the end result will be."