Talks continue on home tax credit

By Alan J. Heavens
INQUIRER REAL ESTATE WRITER

Senate negotiators spent today trying to forge an agreement that would extend the $8,000 tax credit for qualified first-time home buyers past its Nov. 30 deadline.

A decision had been expected by tonight, but procedural issues caused a delay, housing-industry sources said.

The Senate compromise would cut the tax credit to 10 percent of the sale price, with a $7,290 cap, the sources said, and would make the credit available for houses under agreement of sale by April 30, with 60 more days to settle.

Once the Senate acts, the plan will go to the House and then to President Obama.

Supporters of the extension attribute 357,000 of the two million sales of previously owned homes that have been recorded this year through Sept. 15 to the credit, which is retroactive to Jan. 1 – purchases they say would not have been made otherwise.

The National Association of Realtors’ chief economist, Lawrence Yun, expects the final credit tally to be 400,000 of the five million existing-home sales anticipated this year.

Sales of new homes, whose September numbers will be reported by the Commerce Department tomorrow, also are benefiting from the incentive, with a combination of the credit and interest rates at 5 percent “boosting lower-end sales,” said Wayne Norris, sales director for Hanley Wood Market Intelligence, which tracks the market.

Without the credit, recent improvements in the housing market might not have materialized, some observers said.

For example, Standard & Poor’s Case-Shiller Composite Index for August, released today, showed prices in 20 metropolitan areas rising for the third consecutive month, this time 1.25 percent.

According to the index, which excludes the Philadelphia region, the steep price declines of the last two years began slowing in February across the nation.

Philadelphia home prices continue to fare much better than those in the rest of the country, third-quarter data from Kevin Gillen of Econsult Corp. show.

Though Gillen did not yet have figures for the entire eight-county region, his city numbers show prices rising a scant 0.2 percent during the summer, compared with a 6.8 percent rise in the spring.

Case-Shiller says home prices in the 10 largest U.S. cities on its list have fallen 32 percent since the real estate bubble burst in 2006. In Philadelphia, the drop has been just 8 percent.

Joel L. Naroff of Naroff Economic Advisers in Holland, Bucks County, said the national market was healing enough that “it’s worth seeing if it can make it on its own.”

By contrast, Moody’s Economy.com chief economist Mark Zandi said “the housing market [would be] better able to stand on its own two feet” if extending the tax credit coincided with job growth.

Patrick Newport of IHS Global Insight Inc. predicted that if the credit were not extended, prices would resume their decline an additional 5 percent after the first of the year.

Noelle Barbone, who heads Weichert Realtors’ Media office, said the tax credit had raised awareness of homeownership and captured the interest “of people who never thought of buying a home.”

Philadelphia Realtor and mortgage broker Fred Glick is not convinced, saying, “Most of the people who bought because of the credit actually would have bought anyway.”

But ask Lisa Portadin, who is selling her Collingswood house to move to Boston, if she wants the tax credit extended, and her answer is pretty definitive: “Absolutely.”

As originally proposed by Sens. Christopher J. Dodd (D., Conn.) and Johnny Isakson (R., Ga.), the Senate bill would extend the full tax credit to June and expand it to all buyers earning $300,000 or less, except for investors and vacation-home purchasers.

Amendments by Majority Leader Harry Reid (D., Nev.) and Sen. Max Baucus (D., Mont.) would end the full benefit April 1, reducing it by $2,000 each quarter until the end of the year.

Contact real estate writer Alan J. Heavens at 215-854-2472 or aheavens@phillynews.com.

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