Yesterday, the House passed a bill that extends the homebuyer credit an extra six months by a vote of 403-12. The Senate passed the same bill on Wednesday 98-0. Overall, the tax credit stimulus is expected to cost $24 billion:
Under the measure, an $8,000 tax credit for first-time homebuyers would be extended for seven months and expanded with a $6,500 credit for some prospective homebuyers who already own homes. […]
The IRS says some 1.4 million people applied for the homebuyers credit through August, helping enliven the moribund housing market. The legislation would extend the program through June of next year, as long as the buyer signs a contract by the end of April. It also offers a $6,500 tax credit to those who have lived in their current residence at least five years.
The measure doubles the income ceiling for eligible individuals to $125,000. Homes must cost less than $800,000 to qualify.
As I wrote about at the end of last month, with all of the problems in the housing market, the last thing we need is Congress propping up housing prices and stealing demand from the future. Even The New York Times understands the extended credit is problematic:
The vote gives campaigning lawmakers something to crow about on the stump. But the new tax credit appeals primarily to affluent voters who do not need the government’s help buying property. And encouraging buyers to leave one house for another does nothing to reduce the glut of homes on the market, which is an important factor driving down housing prices. Finally, the tax credit does nothing about the central housing problem, which is foreclosure.
Read NYT’s whole op-ed here.
And none of this is to mention the continued spending in a supposed age of fiscal responsibility. The president wants health care to be deficit neutral because his preferred price tag is a whopping $900 billion. But $24 billion here and $24 billion there adds up in the end, creating just as many deficit problems as the spending coming all in one chunk.