The Associated Press is reporting that the administration and congress are undecided about whether to extend the First Time Home Buyer Tax Credit, which is set to expire November 30 of this year. The credit allows up to an $8,000 refundable tax credit on the purchase of a first-time home. It's been a very effective policy for the past year, key to improving economic conditions in the U.S.

 

From the article:

The credit is helping stabilize the housing market, but there are conflicting views about the practicality and cost of an extension. The National Association of Realtors and the National Association of Home Builders have launched marketing campaigns touting the credit and have pushed Congress to keep it going. But some lawmakers are balking at the cost, which may hit an estimated $15 billion — more than double the amount projected in February's economic stimulus bill.

These days, $15 billion seems like chump change in the overall stimulus policy, and given that housing was a leading cause of the current recession, it only seems logical to help qualified buyers get into the market. Actually it seems beyond just logical. It's obvious. One wonders how cynical or misguided someone has to be to criticize this initiative when overall stimulus funds have exceeded 40 times $15 billion. Again from the article:

The federal tax credit covers up to 10 percent of the home price, or up to $8,000, for first-time buyers. Combined with low mortgage rates and falling home prices, the credit helped end the worst housing recession in a generation.

 

Home sales have been rising since May. Prices have stabilized and are gradually increasing in many cities. The glut of unsold homes has been pared down.

 

The tax credit will draw about 400,000 buyers into the market this year, said Mark Zandi, chief economist for Moody's Economy.com, who supports extending the tax credit into at least the middle of next year.

 

"It's too early for policy makers to step away from the market," Zandi said. "The risks are too high."