When Congress voted overwhelmingly Thursday to expand the first-time homebuyer tax credit to include repeat buyers, it brought a ray of hope to segments of the Triangle housing market that have not had much to cheer about of late.
The bill, which awaits President Barack Obama's signature, adds a credit worth up to $6,500 for repeat buyers who have lived in their houses at least five years. The legislation also significantly raises the annual income limits required to be eligible to qualify for the tax credits.
The number of people eligible for the new credit is large, and real estate agents hope it will increase sales of houses that are priced beyond the reach of most first-time buyers.
Laurie Kelly, whose North Raleigh house is on the market for $430,000, is optimistic that the new credit will help her both sell her house and buy one in Virginia.
Kelly's husband recently started a new job in Washington, and the family's house has been for sale since the summer.
The Triangle housing market has a glut of houses priced above $400,000.
"We have a beautiful home," she said. "We just have so much other beautiful competition."
The offers Kelly has gotten have been contingent on the buyers selling their existing homes. Kelly hopes the $6,500 tax credit will help those people sell, which in turn will benefit her.
"It's just a domino effect," she said.
Most people who have taken advantage of the first-time homebuyer tax credit in the Triangle bought houses priced below $300,000, which has greatly reduced the inventory of houses at those price points.
About 1.42 million U.S. taxpayers have qualified for the credit through August, including nearly 45,000 in North Carolina, according to the Internal Revenue Service.
Real-estate agents in the Triangle and across the country had grown increasingly nervous about what might happen if the tax credit were allowed to expire Nov. 30.
In the Triangle, the credit was thought to be the main reason that house sales bottomed out this fall. The number of houses sold during September in Durham, Johnston, Orange and Wake counties was 1,595 - up a half percent from the same period a year ago, Triangle Multiple Listing Services data show.
It was the first year-over-year increase in any month since 2007.
Stacey P. Anfindsen, a Cary appraiser who analyzes MLS data for Triangle real estate agents, said he's doubtful the higher priced homes will receive the same boost from the repeat buyer tax credit.
"There are more people with $50,000 jobs than $200,000 jobs," he said. "If you try creating buyers in the $400,000 and up price range you're really just going back to what we were doing before."
Among the causes of the meltdown in the housing sector were the lax lending standards applied to homebuyers. Anfindsen agrees lenders have stopped making risky loans, but he said the $6,500 tax credit may be small when compared to the decline in personal savings and home values experienced by many.
April, June deadlines
The repeat buyer tax credit is already getting the attention of people who have been casually looking to move into a new home but were not in any hurry. The bill passed by Congress requires that first-time and repeat buyers put homes under contract by April 30 and close by June 30.
Chris Shelton, 32, has been considering selling his North Raleigh townhouse and buying a larger single-family house. Shelton works as a mortgage banker for SunTrust, and he said many of his clients are in the same boat as he is.
"If they were looking now they're really going to want to buy," he said. "It would allow you to knock $6,500 off the price knowing that you're able to get that tax money back."
In voting to extend and expand the first-time homebuyer tax credit, policy makers agreed with the real estate industry that removing the incentive would endanger the housing market's fledging recovery.
"You have a combination right now of the real-estate community not only very pleased but breathing a big sigh of relief," said Ross Rhudy, general manager of Ammons Pittman GMAC Real Estate in Raleigh. "If there's going to be any real recovery in the housing market this was a crucial piece to it."
The question now is when the housing market will reach the stage when such incentives are considered no longer necessary.
Michael Walden, an N.C. State University economist, said that question is increasingly being asked about a number of different government programs that have been launched over the past 18 months to help stabilize the economy.
"The argument for this [program] would be this recession is a residential housing-induced recession and we have to get the residential housing market back on track in order to solidify this emerging economic recovery," Walden said. "You could make the argument that although it's costing us money in the short run, if it is getting us out of the recession quicker it's worth it."
BY DAVID BRACKEN - STAFF WRITER, NewsObserver
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