Tax credits may heat up home sales

Federal tax credits to spur home sales will live on, and Omaha-area home building and real estate officials say the decision to extend and expand the popular program should quickly boost the local housing market.

Congress this week extended the $8,000 tax credit for first-time homebuyers into next summer and coupled the economic stimulus effort with a new $6,500 credit for a segment of current homeowners.

The tax credit had been scheduled to expire Nov. 30, but with President Barack Obama's signature Friday, the program now will stretch to June 30. Some 1.4 million Americans have claimed the credit so far, at a cost of about $10 billion, the Treasury Department says.

Barbara J. Byrd, executive vice president of the Metro Omaha Builders Association, said the extension would drive sales for some people who were waiting to see whether the program would be prolonged. Byrd said the program would help stabilize Omaha's real estate market a bit more and create construction jobs.

“I know builders are standing ready to start immediately if people make that decision,” she said.

The $8,000 tax incentive was credited with turning around Omaha's housing market, particularly the starter-home segment.

But the market has continued to show vulnerability. In the step-up market, for instance, sales turned up only slightly from 2008, showing a limited ripple effect from the tax credit.

Without an extension, local real estate officials were concerned that the housing market would lose its momentum. And it would come as the market enters its annual seasonal sales dip.

First-time homebuyers still will be eligible for the $8,000 tax credit, while current homeowners entering the market can earn $6,500 when buying a new home if they have lived in a home for five consecutive years within the past eight years.

The income limits for people to receive the maximum credit also are increasing: $125,000 for individuals and $225,000 for married couples, up from $75,000 and $150,000, respectively.

Local real estate agents were excited over the extension.

“It's a wonderful thing,” said Mike Riedmann, president of residential sales for NP Dodge Real Estate.

Shawn Maloy, president of the Omaha Area Board of Realtors, said he was “ecstatic” and “hugely optimistic.”

Both praised the expansion for targeting a new segment of the market. Because the pool of first-timers might be somewhat depleted by now, they said, enticing new step-up buyers should help maintain the stimulus effect.

“We think this will do a lot to keep the momentum going,” Riedmann said.

Maloy predicted the program will boost sales of homes priced at $150,000 or higher, a part of the market generally beyond the reach of first-time buyers.

Both officials hailed a change of rules in the new legislation: The looming Nov. 30 expiration had begun to dampen sales because it required them to be closed by that date to qualify, leaving buyers to worry whether their closings could be pushed through in time. The new law applies to deals under contract by April 30, allowing them until June 30 to close — a more predictable end point.

Riedmann and Maloy differed somewhat on what coming days will bring for the local market.

“I think it's going to catch a lot of existing homeowners by surprise,” Riedmann said of the bill's quick passage. (The Senate voted 98-0 Wednesday, the House voted 403-12 Thursday.)

Riedmann predicted that would-be sellers would prepare their homes over the holidays, typically considered a slow period for sales, and “a big boom will come after the first of the year.”

Maloy, though, said slow-holiday sales are a bit of a myth.

“I've never really had a November-December off,” he said, forecasting the tax credit would have a rapid effect. “If you throw money at people, they get educated pretty quick.”

For Omaha's HearthStone Homes, the tax credit program's impact essentially ended weeks ago because of the extra time it takes to build and close on a home. The city's most prolific home builder also didn't build extra inventory that would allow buyers to step into a home in short order.

After selling some 300 homes to people influenced by the first-time buyers credit, HearthStone expects to see more sales now from current homeowners, said Neil Smith, the company's director of community development.

“I think that will open up some additional capacity in the market,” Smith said.

Contact the writer:

444-1128, jeff.robb@owh.com