Housing market watching for tax extension Posted On: Tuesday, Nov. 3 2009 05:09 AM By Matt Goodman
Killeen Daily Herald

The $8,000 first-time homebuyer tax credit that officials attribute to boosting Fort Hood-area home sales since its issuance in February could be extended by Congress this week.

The second round of the legislation would also extend a $6,500 tax credit to homeowners who bought a home no more than five years ago to further stimulate the market.

"They're trying to fuel the whole domino series of being able to sell my house to buy another house and so on," said Jim Gaines, a real estate economist with the Real Estate Center at Texas A&M University.

Without the extension, first-time buyers would have until Nov. 30 to close on a home and receive the credit. Current homeowners were also not part of the initial legislation.

The original tax credit was included in the American Recovery and Reinvestment Act of 2009 as a way to breathe life into a struggling housing market. Congressional analysts believe the extension could cost as much as $16.7 billion, while the original tax credit totaled about $6.6 billion.

In the Fort Hood-area housing market – which includes Copperas Cove, Killeen, Harker Heights and Nolanville – home sales have steadily increased every month but one since the tax credit was issued in February.

Only 138 homes were sold in January this year in the Fort Hood area, while 212 were sold in January of 2008. But in February, home sales increased monthly until September, when 30 fewer homes were sold than in August.

Jose Segarra, spokesman for the Fort Hood Area Association of Realtors, attributes the boost in sales to the tax credit, as well as standard area-market indicators such as troop movements.

"We'll probably see our numbers increase after an extension," Segarra said. "But here we're dictated by troop movement, so it's going to be hard to separate which caused that increase."

Gaines estimates that the credit prompted about a 10-15 percent national boost to the housing market.

"I have no doubt if they expand or extend, whatever they do to it, it will cause home sale volume to increase or to be higher than it would be without it," Gaines said. "Now, would it be another 10 percent boost or more or less? That's a little hard to say."

The tax credit was also popular throughout Texas. On Aug. 20, the Texas Department of Housing and Community Affairs issued loans of up to 4 percent of a mortgage – the total amount released was about $81 million – to help with a home's down payment and for assistance with closing costs.

But the program was canceled on Sept. 23 because of its popularity.

"We were just completely inundated with applications," said Texas Department of Housing and Community Affairs spokesman Michael Lyttle. "We wanted to make sure that we had enough time to give due diligence to the folks who submitted forms at that time."

If Congress votes to extend the credit, officials believe those first-time buyers who struggled being approved for a loan or didn't have high enough credit score before the initial Nov. 30 deadline would have another chance to enter the housing market.

"It's fairly universal and well-known that loan underwriting has tightened up," Gaines said "So credit or no credit, it didn't do you any good if you couldn't borrow the money in the first place."

Contact Matt Goodman at mgoodman@kdhnews.com or at (254) 501-7550.