NAR believes that the current first time buyer tax credit would provide a more beneficial stimulus if the repayment requirement were eliminated.  In addition, the credit should be available for all purchases of a principal residence and not restricted solely to first-time homebuyers.  It should also be extended through December 31, 2009. 

NAR's recently-released Pending Home Sales Index report for November 2008 showed the greatest decline in pending sales transactions since NAR began tracking this market segment in 2001.  (The Pending Home Sales Index is based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed at settlement.)  This suggests that the marketplace has not yet responded to this tax incentive.  This data underscores the pressures in the housing market.  Presently, the inventory of available houses available for purchase is more than three times its usual level.

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Answers to Common Questions about the $7500 Homebuyer Tax Credit

Doesn't the elimination of the repayment feature "cost" revenues?

The sole reason that the repayment feature was included in the July 2008 legislation was to "pay for" the revenue "loss."  There was no other policy basis for the repayment requirement. 

• If there is no policy justification for a provision, that provision should be reconsidered.

Since the tax credit is temporary, what is the objection to repaying it later?

• Consumers see the repayment feature as a debt.  This creates a significant barrier for them, particularly as they try to reduce their debt load.
  
• No other tax credit for individuals has a repayment requirement. 
  
• Neither Realtors nor consumers have any understanding of how the repayment "debt" would be collected.  In a time of uncertainty, consumers are unwilling to take the chance on a tax provision they don't understand.

If the tax credit were extended to all borrowers, would we be rewarding many individuals for doing something (i.e., buying a house) they would have done anyway? 

• The goal of the credit was to provide an incentive to generate market activity.  Expanding the credit's availability should help generate activity.
  
• Market activity can reinforce the perception that it's a good time to purchase a home.
  
• Market activity can stabilize prices.
  
• First-time buyers might be the most likely to be afflicted with "the jitters" in this market because they are unfamiliar with the home purchasing process and with the tax rules that accompany homeownership.  If all purchasers were eligible for the credit, individuals and families that are familiar with homeownership could lead the way to market activity, thereby encouraging first-time purchasers.

How does this proposal fit in with the efforts being made to provide additional foreclosure and loan restructuring relief?

• The tax incentives associated with the homebuyer tax credit are completely independent of the efforts being made on housing finance relief. 
  
• Even if every problem mortgage and short sale problem were resolved, the marketplace would still have too much inventory for sale.
  
• The current inventory of homes for sale is about three times greater than would be expected in a normal or strong market.