By Tom Cali
Dolan Media Newswires
Rochester, N.Y. — The housing market received good news this month when Congress agreed to extend the tax credit for first-time homebuyers as well as add current homeowners in the mix.
The new $24 billion stimulus bill received overwhelming support before it was signed into law by President Barack Obama.
The program, which was supposed to end at the end of the month, now will be available through June 2010, as long as the buyer signs a binding contract by April 30, 2010. The measure continues to give first-time homebuyers an $8,000 credit and provides current homeowners a $6,500 tax credit as long as they have lived in their current home for at least five years.
Some real estate insiders said the bill is just the foundation needed to restore the housing market.
Since the incentives began in August, 1.4 million first-time homebuyers have qualified. According to a National Association of Realtors estimate, 350,000 of those buyers would not have purchased a home without the credit.
Critics say such incentives only make home buying happen sooner rather than later. They foresee the market taking a nosedive again when the credit expires.
While it remains uncertain whether expansion of the program will be the ultimate solution to the housing crisis; it does get the ball rolling in the right direction. Encouraging timid Americans to invest in an economy that has gone from bad to worse over the past year surely is a necessary step toward financial stability in the U.S.
The major question now seems to be how long interest rates will remain low.
Some experts predict rates may drop to 4 percent in 2010. Even though the stimulus plan has helped to stabilize interest rates — and keep the mortgage market functioning — it has done so by increasing our national deficit.
The amount of money the government has been printing also could be a problem. The government has been printing money at an alarming rate to keep the economy flowing. All of this activity points to inflation in the future.
An increase in money supply normally produces an increase in the cost of living as well as the cost of goods and services. The high unemployment rate has kept inflation in check to date, but as the job market improves so does the threat of inflation.
What does it all mean to the average homebuyer? The message is simple: Buy now or relatively soon, and take advantage of these opportunities. With the tax credits and low rates in line through the first quarter of 2010, there is no reason to wait.
Tom Cali is vice president and sales manager for WebTitle Agency, an authorized title insurance issuing agent for First American Title Insurance Co. of New York and Fidelity National Title Insurance Co.