The housing tax credit: the end is near

The $8,000 new home buyer tax credit and $6,500 credit for repeat home buyers has helped keep the residential real estate market alive during the housing crisis.

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But that life line is nearly at an end.

The credits are good on purchases made by April 30. In some cases, it works to have a binding contract in place by the end of April if the purchase is completed by the end of June. But the bottom line is we’re nearly 30 days away from the end.

The credits and historically low interest rates have eased an otherwise miserable housing market the past year.

“When we lose those market boosters, what will happen,” the research director for the Minneapolis Area Association of Realtors asked last month..

His answer? “Expect a second (smaller) dip in sales and prices.”

That’s what Realtors in MPR’s Public Insight Network have been telling us the past few weeks. Assuming the credits aren’t extended, the April 30 deadline will deliver a burst of buying in the next 30 days. What happens after that?

There are some positive signs. But this market and others will continue to struggle for years with people trying to sell homes that are worth less than they owe on the mortgage. That short sale mess could keep a damper on home values for years.

We know that. What we don’t know is how much the federal credits have been propping up the home buying market the past year. We’ll find out pretty soon.

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Tell us what you think will happen to the Twin Cities housing market when the credits are done. Post something below or contact me directly.

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