first home buyer tax credit

First-time Home Buyers (FTHB) who purchase a home before December 1, 2009 will receive a First Time Home Buyers Tax Credit (credit) of up to $8,000 when they complete their tax returns next spring. Many people are calling on Congress to extend, and even increase, this tax credit.

Over the past 6 months, most housing reports across the country have shown increasing gains in the housing market. Most reports point to this tax credit as at least one reason that the housing market seems to have bottomed and begun to rebound. These people argue that this resurgence in the housing market will end abruptly on December 1.

They point to the fact that 30% of all home sales in July were to FTHBs. Some reports show sales of FTHBs account for up to 50% of sales in some markets. What will happen to the housing market without this important incentive to lure would-be renters to purchase a home?

Richard A. Smith, CEO of Realogy, parent company to Century 21, ERA, Coldwell Banker, and Sotheby’s International Realty, says, ”The giddiness we see out there is without merit.” He believes that the housing gains are mostly attributable to these credits. Others disagree. Michelle Meyer, an economist with Barclays feels that while the credit contributed to an increase in sales, much of the increase points to a strengthening of the economy. “Even if you say some of the gain is artificial, it's still true that we're seeing an increase in housing demand, and that shows fundamental strength," she says.

Others still think the credit should be extended and expanded in size and scope. Mark M. Zandi, chief economist at Economy.com, analyzed the housing market and says that increasing the tax credit to $15,000 for all home owners (not just FTHB) through the end of next year would result in 675,000 additional home sales. Johnny Isakson, US Senator from Georgia, is behind a plan to just that.

Regardless of whether or not you think it should be extended, if you're counting on using the First Time Home Buyer Tax Credit, time is running out. The purchase must close on or before November 30, 2009 .