Looks like home buyers may have to wave goodbye to $15,000 [Updated]

More economic stimulus package details will no doubt be forthcoming but here's the latest from the Associated Press:

House and Senate negotiators agreed to pare economic stimulus legislation below $800 billion and reached for a final deal with the White House on Wednesday on a bill designed to create millions of jobs in a nation reeling from recession....

Several Democratic officials said there was an informal deadline of Wednesday afternoon for at least tentative agreement on an overall bill, a time that coincided with a scheduled formal meeting of House and Senate negotiators....

Working to accommodate the new, lower overall limit of the bill, negotiators effectively wiped out a Senate-passed provision for a new $15,000 tax credit to defray the cost of buying a home, these officials said.

It is not clear whether the House's first-time home buyer's tax credit of 10% of a home’s cost, up to $7,500, is still on the table or wiped out too. Hat tip goes to Laker.

Here's the update, from Reuters:

Congressional negotiators are close to agreeing on a $7,500 tax credit to encourage home sales, instead of the larger, $15,000 credit that was in a Senate-passed economic stimulus bill, Senator Joseph Lieberman said on Wednesday.

Lieberman said, "Yes, definitely," when asked by Reuters whether the negotiators were leaning toward the smaller credit for first-time home buyers that was in a House-passed bill.

Separately, during a Senate committee hearing, Senator Bill Nelson said the $15,000 credit is "likely ... to be cut down to a $7,500 credit" for homes bought after Jan. 1, 2009.

Hat tips goes to McCamman.

-- Lauren Beale

Thoughts? Comments?

Comments

[MyLessThanPrimeBeef]

You can lead a bank to the credit spigot, but you can't make it lend.

Similarly, you can lead a sane homebuyer to the tax credit trough, but you can't make him drink it.

[mccamman]

Reuters is reporting that Lieberman says it is back to 7500.

[Micah Johnson]

Booooooooooo!

[Micah Johnson]

Booooooooooo!

[Lego Hater]

I'll be happy if they did this first time buyer bailout in 2010 when a sane person might actually consider purchase a home.

[Joanne Constantinides]

Greed is what got us all into this mess to begin with. $7500 is better than nothing.....at least the last time I checked.

[JayC]

I'm happy that the $15K "incentive" is being cut, but angry that there's consideration to keep it at $7.5K.

If everyone in LA gets $15K to buy a house, the value of a home will just be inflated by $15K. This is basic economic equilibrium.

I realize the whole point is to stop price declines, but this does so in an artificial, unsustainable way, and only delays the inevitable.

Buyers like me are not staying out of the market because we can't afford it; we're staying away because there's no floor on home prices. This doesn't create that floor - it just makes it take longer to reach the floor, and people are patient (read: cautious) when it comes to sinking hard-earned money into an asset they know will depreciate further.

A $15K "buyer's bonus" is transparent - it doesn't take a genius to figure out that unless you offer it to everyone in perpetuity you're going to have to repay it in a lower sales price or less equity later on when that plug is pulled.

[John Murray]

Its amazing! The only part of the stimulus bill that might have produced a job is has been cut out. The problem with the housing industry is there is so much stock that has to be sold before construction can begin again.

Oh well, I guess they were able to buy more contraceptives with the saved money.

[xtine]

We don't need 15K to buy a house.
We don't need little tricky tax credits either.
We need good underwriting, 20% down, and lower prices.

Nothing else is going to breathe life into this market.

Nada.

[John W]

Latest!!!!!! Looks like the $15K tax credit is out of the stimulus bill. That's good news for the home buyers.

Why? At the end of day, the $15K credit is really not for the buyers. Rather it's a way to prop up the inflated housing prices and keep it high and unaffordable. I'm glad the lawmakers see through the big picture and realize that the key to restore the housing market is to let the housing prices fall further to its equilibrium. The faster it gets there, the sooner the market will resume normal buying/sellng and borrowing/lending.

[CompaJD]

The difference between a 400K loan payment and a 375K is about 100$ a month. I don't think this makes a home in California all that much more affordable. This is just another poorly thought idea by .gov.

[Nick]

Oh noes, not the house flipping subsidy! What will all the house flipping scum and real estate lobby do without their $40 Billion handout from the taxpayers? How will the industry justify continuing to purchase all of those Congress people, if they can't even get a simple corrupt handout barely larger than the GDP of most small countries? What's the political system coming to?!?

Oh, wait, phew, it's only a reduction, not an elimination... I guess all our hard-paid bribes and favors weren't for nothing. Maybe our legislators can even score some points with voters for paring down the repugnant payoff, as long as they forget we added it only last week. I guess we'll just have to make due with fleecing the American people for $20,000,000,000; maybe we can sneak in some additional unrelated pork perks like everyone else to compensate for the sacrifices we're having to make.

[tonylogan]

Good news for renters and responsible citizens.

A $15k tax credit would just instantly drive the price of houses up, it would not make homes more affordable for those now looking to buy.

It is no different from providing excessive student loans driving up the price of college education. Why should schools charge less when they know the kids can take out more in loans?

[Jeff Belonger]

I agree with Joanne.... I truly think that $7,500 is good and that they need to pay it back. What, did we find another money making machine that prints greenbacks 24/7??? I thought we ran out of ink on that one.

Seriously, I am all about making things work, helping out people. Hell, I have been doing mortgages for 16 yrs. Some people will argue sweat equity over DPA loans and 100% financing. I truly believe that there is a middle ground. I wrote this...

http://activerain.com/blogsview/923079/Should-we-run-our-COUNTRY-like-a-business-or-like-a-soup-kitchen-Food-for-thought

Overall... let's step back...you need money to buy a home, before you can get the tax credit. Sure, there is one more way, which I wrote about.. and sure, some people were able to save $20,000 to $30,000... but there are more with barely 3% to put down. I am semi glad, because too many people have been talking about this, thinking the flood gates were going to open wide with many, many buyers. jeff

[Laker]

we have currently $7500 in current law.
The question is will they eliminate the need to repay it (over the next 15 years). The other big thing is if this is a refundable credit so everybody can get it no matter how much their tax liability is or is it non-refundable, and only goes against your tax liability.

If they want to help to poor/middle class they need to make it refundable, if they want to help the rich, make it un-refundable.

[Mozart]

It's a shame it was taken out and reduced. This one had a chance of stabilizing the market, preserving wealth and creating jobs.

This is a cycle that is feeding on itself and needs to be broken. Home prices becoming "affordable" is a relative fiction when an economy is in free fall.

Since housing and construction represent about 20% of the economy, and more in many states, this would seem to be an important underpinning for the general economy.

Another missed opportunity, nothing will be done and everyone will be worse for it.

[lalandjunkie]

Well unfortunately the world doesn't revolve around CA. This $7500 credit won't make a difference in SoCal but it might help out someone who wants to buy a 2 bedroom for 70k in Huntsville, Tennessee

[A Scanner Darkly]

Is this TC based on a percentage of the sale price? I mean, you could buy an abandoned house in Detroit for $15K and get it for free.

[Nick]

I can't tell if people lamenting this (eg: Mozart) are being sarcastic, or actually think this ridiculous hair-brained payoff scheme would have had any real economic benefit for the country. It's hard for me to believe anyone could think this was a good idea, but on the off-chance...

This was not a good plan. It would not stabilize the market, or preserve wealth, or create jobs, or create a bottom, or any other mis-attributed platitudes. It was a payoff and a flipping subsidy: that's all.

Home prices are becoming more affordable, even with the economy correcting for recent excesses in deficit consumption. Yes, we need to fix the economy; no, subsidizing flippers is not going to help. Yes, it is important to get the housing and construction industries going again for the overall economy. The way to do that is, was, and will be letting house prices get to "market normal", so people can start buying, selling, building, and modifying them again.

It's the same in any market, at any point in history: when people are uncertain or scared, or think the market is being manipulated, they choose not to participate. That's what's happening in the housing industry; once you realize that, the idea of more uncertainty and manipulation fixing the problem becomes obviously idiotic. People need certainty (stable, market normal prices), confidence (jobs, stable market prices), and low fear of market manipulation (unlikely soon) for the market to recover; until we have enough of these, all the idiotic wasteful payoff pork programs in the world aren't going to help with squat.

[JustinMcC]

That's about right.

[Kev]

This is typical, once again, democrats are shoving us further into recession. "New Jobs???" What are they talking about??? They are spending 850 billion dollars on useless projects which will likely line the pockets of people who don't even need the money. Republicans were trying to stop the housing crisis by going after the problem that started this recession. Now, home values will continue to fall, retail sales will continue to suffer, and this recession will likely persist for 2 to 3 years (at a minimum) because inflation will take hold by years end, making so even the highest paid individuals struggle to buy a gallon of milk. I consider all of Washington DC ignorant, and all should be fired, and I mean EVERYONE! This is irresponsible spending, and they should be held accountable!

[Nils]

It will not inflate the housing market at all. It is only for first time home buyers which isn't that high of a percentage of people buying a home. These are also the people who with an extra few thousand in their pocket are most likely to stimulate the economy. They need furniture, electronics, linens, new plates, dinner ware etc. They are the ones most likely to spend on a variety of things. This will help the economy a lot more than giving everybody a few hundred dollars which they just save anyway. This is a good bill democrat republican or other

[sigepsal]

Those of you who think this is a bad idea, and believe that the way to get back to a good economy is 'sticking to good underwriting and 20% down' is rediculous. If you think your home price has droppped now, I would love for you to see what would happen to your house's value if they got rid of FHA lending. Think of it like this. The average home price in LA is over $300,000. Lets just pretend the average salary in LA is $50,000. In your perfect world someone would have to save over one year's salary just to put a down payment on a home, all the while still paying all the normal bills. Please tell me what the difference in a $1,200 mortgage payment and a $1,200 rent payment is? Its the down payment, that many first time homebuyers can not afford. And, if FHA didn't give these people an opportunity to buy a home, then the demand for homes would drop even further, and therefore your home's value would drop even further.

Please, for one second, take a step down off of your high horse, realize that this tax credit really would have helped a lot of first time buyers buy a home. And, the only way we are going to get out of this housing slup is to get first time buyers into the market. Period.

[inland empire]

Home price need to continue to drop until first time buyers become the market not investors. The credit was a bad idea because it was not going to help a 20 /30 year old family guy to purchase a new home. He is trying to feeding two kids, paying car note, day care and worrying about lay-offs at his job. It will takes awhile for the next batch of home buyers to mature financial with DP and FICO scores. The bubble use up all of the current genaration of first buyers, must have been foreclosed and happy to be renting again. Know we got years of home buying draught ahead because we burn up the crop of buyers ahead of time....

[Drew]

Hold the presses folks....

Now it looks like it will be an $8000 tax credit (that does not have to be repaid) for first-time homebuyers only and only for houses purchased through August.