It’s finally finalized… After weeks of changes and cost cuts, details of the $787 billion American Recovery and Reinvestment Act (previously referred to as simply the Economic Stimulus Package) are settled upon. So, how’s it going to benefit the housing industry? Increased tax credit for first-time home buyers with no repayment requirement anymore.
The main incentive expected to inspire activity in residential real estate is the first-time home buyer tax credit. The available amount was increased from $7,500 to $8,000, and buyers are no longer required to repay the money. The $15,000 tax credit for all home buyers added to the preliminary legislation in early February was cut from the final version of the bill. National Association of Realtor representatives believe the new tax credit is enough to get the ball rolling with many first-time buyers and could lead to 300,000 home sales this year. The trickle down effect is stabilization of home prices and moderation of homeowners going into foreclosure.
In Chicago, business is already picking up as home buyers anticipate savings presented by the $8,000 tax credit, further bolstered by foreseen reinforcements to the economy and job markets. Many local real estate agents are noticing a shift in consumer confidence that is only expected to grow as spring selling season draws near. The spurt of buyer motivation could bring down the inventory of homes for sale and level-off price drops. So this is a good opportunity to get in the market when interest rates on mortgages are still very low and the selection of properties is still extensive.
This chart from the National Association of Realtors shows the full details of the new tax credit and how it compares to last year's version.
FIRST-TIME HOMEBUYER TAX CREDIT
As Modified in the American Recovery and Reinvestment Act
Major Modifications Shaded
Source: National Association of Realtors