Reluctant potential homebuyers could be in line for some additional tax and financing enticements, either through a post-election lame duck congressional session or from the new Congress arriving in January.
Though House and Senate leaders have not agreed on whether to hold a session immediately after the election, national housing industry trade groups are pressing hard for a second round of emergency economic stimulus legislation, ideally before the end of December.
The rationale: The housing debacle was the trigger of the current economic mess, but until the housing market is put back on track - and the huge backlog of unsold new and existing homes is reduced - a serious recession may be unavoidable.
The National Association of Home Builders is working on a plan for a new, more generous tax credit for homebuyers, possibly as high as $10,000 to $12,000. According to Jerry M. Howard, president and CEO, the association also wants to create a mechanism to "monetize" the new tax credit, turning it into immediately spendable cash for a down payment. This might be achieved through credit-anticipation loans from private lenders that would be repaid by buyers after receipt of the credit on their next federal income tax return.
The National Association of Realtors is asking Congress and the Bush administration to jolt housing sales immediately, and has its own package for that purpose. Among the proposals: Rework the current $7,500 "first-time buyer" tax credit enacted by Congress this summer by removing the requirement that buyers repay the credit to the government over a period of years or when the property is sold. Under the Realtors' plan, the credit would remain at the current level, but would be available to buyers of primary residences and require no repayment.
Lawrence Yun, the chief economist for the association, said that Congress' repayable $7,500 credit has not been sufficiently attractive to pull large numbers of buyers into the market.
Potential buyers "view [the current credit] as a loan that they've got to pay back," he said, "but they don't want to be burdened with more debt," even at a zero interest rate. The repayment feature "is a big psychological barrier" for consumers, he said.
Though Yun believes that a "larger credit [than $7,500] would be better," simply getting rid of the repayment feature and broadening the spectrum to all buyers would spur significantly higher sales at a relatively modest cost to the Treasury.
