LIANE HANSEN, host:
Spring time is usually the peak season for home buying, but not this year. When Congress created an $8,000 tax credit for first-time homebuyers, it set off a real estate rush hour. Buyers who qualify and can complete a home purchase by November 30th will never have to repay the government for the $8,000. With interest rates low and home prices depressed, sales figures are finally turning up.
Here to explain the first-time homebuyer tax credit is NPR's senior business editor Marilyn Geewax. Welcome back, Marilyn.
MARILYN GEEWAX: Thanks, Liane. It's good to see you again.
HANSEN: So let's get into the nuts and bolts of this program. First of all, the government really gives qualified buyers $8,000?
GEEWAX: Yes, it does. Congress decided earlier this year that it was going to subsidize the housing market by granting tax credits. A buyer doesn't just get a tax deduction, you actually can get a check in the mail. To qualify, all you have to do is be buying your first home, or at least your first home after having a period of renting for three years.
This program was designed to motivate renters and get them into houses. The real estate agents say that the housing market has to heal from the bottom up. So job number one for them right now is just to get people into those vacant starter houses that are clogging up the market.
To keep the focus on first-time buyers, Congress set an income limit for this full credit. For a single person, that's 75,000, and for married couples it's double that. So, really, this is a program for middle-class people. It's not for wealthy homeowners who want to move up into a mansion.
HANSEN: Elaborate on the response a little bit. I characterized it in my introduction as a real estate rush hour.
GEEWAX: I actually called up a bunch of realtors around the country and they say this program is working. It's just like the Cash for Clunkers got people in the mood to head to the dealership. Well, this program is getting people to go around to those open houses on Sundays. And sales really are showing the first uptick in years.
You know, with that deadline we talked about, it's getting people to act in August. When you sit on the fence for a while and then all of a sudden you take a look at the calendar and you see that, you know, it's going to take a while to find the house, get the inspections, get the appraisal, get your loan, you pretty much have to get moving now.
HANSEN: Now, do you get the $8,000 when you close on your house immediately? Or do you have to wait for it?
GEEWAX: You actually will get the money when you pay your federal taxes next year. So, when you go to fill out your IRS tax forms, you claim the tax credit, and then it reduces your tax bill by that. So, let's say you owe $8,000 in federal income taxes, you fill out your forms and now your taxes owed are zero. And if you've had that withheld, you'll actually get a check in the mail. And, you know, some people don't pay any federal income taxes because their income's so low. In that case, you can actually get a check in the mail.
And, Liane, I know you're probably thinking of a scam, what if I bought a $10,000 shack? You won't get an $8,000 tax credit in that case. This is proportional. So it's 10 percent of the home's price. That means if you buy a $50,000 house your tax credit will just be $5,000.
But, you know, the great thing about this tax credit, no matter how much you get is it doesn't have to be repaid. Last year, when Congress created a different kind of a tax credit, that one was really just an interest-free loan that you eventually had to pay back. But this one, there's no repayment, no interest and there's even in some cases where if you have an FHA insured loan, you can use this tax credit in a way that effectively creates a down payment for yourself.
HANSEN: Given that this is so popular, what are the chances that it will be extended beyond November 30th?
GEEWAX: Lawmakers are already getting a lot of pressure from their constituents: small businesses, real estate agents. In fact, the National Association of Realtors went before the House last month and testified that this program is so successful, they need it to be extended into 2010. And there is a bill that's been introduced and that would extend all through 2010, and it's got nearly two dozen sponsors already.
Now, of course, when Congress comes back in September, they're going to be faced with a growing budget deficit, lots of pressure for health care costs. So whether or not Congress can find the money to continue to extend this program is dicey. I'm not sure which way that will go, but certainly there will be a lobbying effort to extend this, just the way Congress got pressure for extending the Clunkers program.
HANSEN: NPR's business editor Marilyn Geewax. Thank you, Marilyn.
GEEWAX: You're welcome, Liane.
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