First-time home buyer credit, jobless benefits both extended

Associated Press / November 6, 2009

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WASHINGTON - Missed out on Cash for Clunkers? Congress has another deal for you: Buy a home before May 1 and collect up to $6,500 from the government. If you’re a first-time home buyer, get up to $8,000.

As part of the government’s efforts to encourage people to spend money to help revive the economy, the House voted 403-to-12 yesterday to expand a popular tax credit for home buyers. The bill, which also extends unemployment benefits and expands a tax break for money-losing businesses, now goes to President Obama, who plans to sign it today.

First-time home buyers have been getting tax credits of up to $8,000 since January as part of the economic stimulus package. But with that housing program scheduled to expire at the end of November, the House voted to extend it into the spring - and to expand it to many people who already own homes.

Buyers who have owned their current homes at least five years would be eligible, subject to income limits, for tax credits of up to $6,500. First-time home buyers - or people who haven’t owned homes in the previous three years - could get up to $8,000. To qualify, buyers have to sign purchase agreements before May 1 and close before July 1.

“It’s huge. I think it’s going to have a big impact,’’ said Patti Ketcham, who owns a real estate firm in Tallahassee. “I hope I’m right. Golly, I hope I’m right.’’

Like housing markets across the country, Tallahassee’s has been depressed since even before the nation’s economy plunged into recession. There was no huge boom and bust like there was in many coastal areas, Ketcham said, “but ask anybody trying to sell a house and they’ll tell you it’s been no fun.’’

The credit is available for the purchase of principal homes costing $800,000 or less, meaning vacation homes are ineligible. The credit would be phased out for individuals with annual incomes above $125,000 and for joint filers with incomes above $225,000.

Real estate agents say the first-time home buyers’ tax credit that’s already in effect has boosted sales, much in the same way the Cash for Clunkers program increased auto sales last summer by paying car buyers as much as $4,500 for exchanging their old gas-guzzlers for new, more fuel efficient models.

The agents hope the expanded housing credit will help stabilize housing markets during typically slow sales months in the winter. Today, many would-be buyers are still worried that home values could drop further, said Lawrence Yun, chief economist at the National Association of Realtors.

“Once the consumer fear factor disappears, then housing can move into a sustainable recovery,’’ Yun said. “I think we will be there by the middle of next year.’’

Another portion of the bill passed yesterday extends unemployment benefits for almost 2 million people out of work nearly a year or more as the country continues to lose jobs.

The White House quickly announced that Obama today would sign the bill that House Speaker Nancy Pelosi characterized as a lifeline “to the men and women hardest hit by the recession,’’ the people who still can’t find work even as the economy shows signs of coming back to life.

The measure extends benefits for 14 weeks for all those who have exhausted their federal aid or will do so by the end of the year. Those living in states where the unemployment rate is at 8.5 percent or above get an additional six weeks. The Massachusetts jobless rate is 9.3 percent. The national rate is 9.8 percent.

The fourth extension passed by Congress in the past 18 months would stretch federal aid to a maximum of 99 weeks, well beyond the extent of government intervention during past economic downturns. During the 1970s, the out-of-work were entitled to up to 65 weeks of assistance.