chief economist Mark Zandi as saying that by the time the credit expires, it will have been responsible for sales of 400,000 new and existing homes, out of a total 1.4 million sales.
Zandi warned that the impact of letting the credit expire, coming just as sales of foreclosed homes are rising, would increase downward pressure on home prices and jeopardize the economic recovery.
While the current amount of the tax credit and the income caps for claiming it are likely to remain in place, the credit may be extended to all homebuyers, according to Democratic leaders in Congress.
House Speaker Nancy Pelosi said at a recent press conference that extension of the homebuyers’ credit is under consideration. “And the question is, would that be just first-time homeowners or would you open it up to other purchasers of homes?” she added.
The other question, according to Rep. Charles Rangel (D-New York) is how long it should be extended for.
A recent survey by Zillow found that nearly one in five prospective first-time homebuyers (18 percent) said extending the $8,000 tax credit would be the primary influence on their decision to buy a home before the end of 2010.
That would equate to 334,000 buyers in the period from December 1, 2009 to November 30, 2010, if the credit is extended for a year.
In the Zillow survey, a further 25 percent of those queried said the tax credit would be a “significant influence” in their decision to buy, while another 27 percent said it would have “some influence.” The remainder, 31 percent, said it would have no influence.
Zillow calculated that if the credit were extended, a total 1.86 million first-time homebuyers would purchase homes in that period. If all were able to take advantage of the full $8,000 tax credit, this could mean up to nearly $15 billion in tax credits.
Zillow chief economist Stan Humphries said the tax credit would have a substantial impact if it motivated 334,000 additional home buyers. “Their addition to the market next year could make the difference between a robust annual increase in home sales and a flat or negative change in home sales relative to this year,” he said.
However, he noted, that has to be weighed against the cost, since four of five prospective homebuyers would probably proceed with a purchase even without the tax credit.
In the meantime, the House has voted 416-0 to extend through 2010 the benefits of the first-time homebuyer tax credit to military, intelligence, and diplomatic personnel who have been outside the United States on active duty for at least 90 days in 2009.