The lower-priced end of the housing market is heating up as first time home buyers race to cash in on the $8,000 federal tax credit. The credit covers up to 10% of a home's purchase price, and is available to buyers who haven't owned a home for at least three years. In order to qualify, they must close on a home purchase by November 30.
The credit took effect in April and has helped segments of the nation's moribund housing market. The National Association of Realtors estimates that the credit will boost home sales this year by 350,000 units. As many as 2 million first-time buyers will take advantage of the tax credit. In Minnesota, more than 28,700 taxpayers have requested the credit by amending their federal tax returns.
In the Twin Cities, the looming deadline is stoking demand for homes priced at less than $190,000, pushing overall sales in that price range up compared to a year ago. Sales of pricier homes, however, are still low.
As this Star Tribune article points out, what happens when the credit expires remains to be seen.
Sales of vehicles plunged after the $4,500 federal "cash for clunkers" subsidy went away. The housing industry, fearful of a similar impact in housing, is pushing for an extension, and at least a dozen proposals to extend the program have been introduced in Congress.
But for now, people within the real estate and mortgage industry are expecting continued activity. If you're a first time home buyer and you're in a position to take advantage of this tax credit, the time to act is now.