Would Extending Home Buyer Credit Be Worth It?
RENEE MONTAGNE, host:
It's MORNING EDITION from NPR News. I'm Renee Montagne.
STEVE INSKEEP, host:
And I'm Steve Inskeep.
Now that the Federal government's fiscal year has ended, we can have a look at the bill. The deficit hit $1.4 trillion in the year ending in September. That number shatters all records.
MONTAGNE: Much of the spending was to rescue the economy. And this morning we'll look at one relatively small item. It's a federal tax credit for first time home buyers. The government offered $8,000 per home to boost the housing market. Now it's about to expire, raising the question of how much more spending is enough.
NPR's Chris Arnold reports.
CHRIS ARNOLD: The tax credit actually expires at the end of November, but it can easily take a month-and-a-half to go through the home buying process after you put in an offer. So home buyers now are right up against the deadline to qualify for that $8,000.
Mr. ABEL SANCHEZ TORRES: I mean, I've been online everyday, and I'm picking them out. I got, you know, I drive around the houses before.
ARNOLD: Abel Sanchez Torres(ph) is looking at a house with his mom and a realtor in Boston's West Rocksbury neighborhood. He's driving all over the Boston area to try to find one before the tax credit expires.
Mr. SANCHEZ TORRES: Yeah, I mean, I'm looking at a bunch of houses, over six a day maybe or, you know, and on the weekend we'll cram at least 10 or 20 houses on a weekend to look inside and stuff like that.
ARNOLD: Torres is 25 years old. He works for a contractor that does repairs and upgrades on military submarines. And he's decided with home prices down, low interest rates, and a tax credit, it's a good time to buy a house. John Bristol(ph) is Torres' realtor. He says that the tax credit definitely is helping to give a boost to the housing market.
Mr. JOHN BRISTOL (Realtor): Oh, absolutely. I mean $8,000 is a lot for a first time home buyer. I mean, they're just scrounging up for the down payment. So this 8,000 can help them quite a bit on fixing it up afterwards.
ARNOLD: With historic price drops and the biggest wave of foreclosures in 50 years, the housing market can use all the help it can get right now. And real estate industry groups are pushing hard for the government to extend this tax credit. But even though it's helping his business, Bristol says the government spending all this money makes him nervous, whether it's for home buyers or Cash For Clunkers. So he actually doesn't like the idea of extending it.
Mr. BRISTOL: It's going to put more debt onto the national budget.
ARNOLD: So are your fellow realtors going to throw tomatoes at you?
(Soundbite of laughter)
Mr. BRISTOL: I know!
ARNOLD: But that's the question with any of these stimulus programs: is it worth it? The Congressional Budget Office estimates that the home buyer tax credit will cost about $15 billion. Extending it, of course, would cost more. But many lawmakers seem to think that this program is worth the price tag.
Senator JOHNNY ISAKSON (Republican, Georgia): This economy that we're in went into the tank because of residential housing, and it will only really come out of the tank with residential housing.
ARNOLD: That's Republican Senator Johnny Isakson of Georgia. He wants to extend the tax credit at least through June of next year, and perhaps raise the amount to $10,000 or more. Isakson used to be a realtor. He says economists estimate that the tax credit will mean up to 350,000 additional home sales. That helps to stabilize the housing market. And Isakson says compared to the overall stimulus, this program really isn't that costly.
Sen. ISAKSON: The stimulus that Congress passed was $787 billion. The total cost of this, if you extend it for a year, not half a year, and if raised to 10,000, would be about $28 billion. That's less than four percent of the stimulus - yeah, we already have proof of how many home sales it will generate, how many jobs it will produce. So by any measure, it is a small down payment on a great repayment that we'll get in our economy and it's not throwing dollars away.
ARNOLD: Lawmakers have introduced nearly two dozen bills to extend the tax credit or to expand it. And yesterday the House Small Business Committee held a hearing on the subject. New York realtor, Joseph Canfora spoke on behalf of the National Association of Realtors.
Mr. JOSEPH CANFORA (National Association of Realtors): When the tax credit went into effect, we saw immediate increase in activity. It was night and day, that was the difference. And now we see it turned off.
ARNOLD: Some economists want the tax credit extended, but others don't. Andrew Jakabovics is the associate director for housing and economics at the Center for American Progress. It's a think tank that's closely aligned with the Obama administration.
Mr. ANDREW JAKABOVICS (Center for American Progress): I'd rather not see it extended, but I think it's likely to be extended. So I think that the real discussion needs to be how we can improve it.
ARNOLD: Jakabovics says that the tax credit wastes money because four out of five first-time home buyers would have bought a house anyway. So he would like to see the program limited, say to people who buy houses in areas that are hard hit by foreclosures and where there's a real glut of homes on the market that needs to get sold.
Mr. JAKABOVICS: That's a good investment of the taxpayer dollars. But to pay, you know, a household that's making like $170,000 to buy a really expensive condo in, you know, New York City, that's probably not the most stimulative kind of activity. And it's not the best use of taxpayer dollars.
ARNOLD: Senator Isakson is hopeful that Congress could pass an extension within a couple of weeks.
Chris Arnold, NPR News, Boston.
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