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The Senate is expected this week to pass an extension of the credit that was originally going to expire Nov. 30. Buyers who sign a purchase agreement by April can now claim the credit.
The extension will apply to higher income buyers. Previously the credit was available to individual filers making $75,000 a year or less. For couples the limit was $150,000. The new income limit will be $125,000 for individuals and $225,000 for couples.
There’s also something in for move-up buyers. Previously you couldn’t claim the credit if you owned a home in the past three years. Now, if your last home was your primary residence for at lease five years, you can claim $6,500 in credit if you buy a new home. The new house can’t cost more than $800,000 though.
Just in time to kick Washington into action, the National Association of Realtors reported that pending home sales jumped 6% today. That’s the eighth month in a row of sales increases and the longest rising streak since 2001. “What we’re witnessing is a rush of first-time buyers trying to beat the expiration of the tax credit at the end of this month,” said the association’s chief economist Lawrence Yun.
I’ve a written before about the role psychology has in home purchases. No where is that topic more relevant than in what we’re seeing with the tax credit. I participated in an Internet interview last week on the housing market on the Financial Fitness Show . Jim McQuaig, a mortgage broker in Reston, Virginia, said he recently completed financing for a woman buying a $430,000 home who said the $8,000 tax credit was the incentive.
Imagine that, one of the largest purchases of your life and you’re moved to do it by a tax credit worth less than 2% for the purchase price!
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.