The Ripple Effect of The Non-Repayable Tax Credit

Written by: Kenneth R. Harney / Realty Times

First time buyers will get an improved, higher, nonrepayable version of last year's repayable $7,500 tax credit under Congress's massive $789 billion economic stimulus package.

That in turn should lead to 500,000 additional home sales this year, according to new estimates prepared by the National Association of Realtors economics staff .

With the credit eligibility period now extended to September 1, instead of the previous cut-off date of June 30, the 500,000 additional transactions will include purchases not only by direct users of the credit, but also replacement home purchases by sellers who are moving out …or moving up.

This year's better tax credit should also generate huge amounts of "ripple effect" bang for the buck -- $62,000 of additional economic activity for every house sold - or roughly $31 billion in incremental economic benefits, according to the Realtors' projections.

Why? Because virtually every home purchase triggers other purchases and payments down the line -- furnishings, appliances, remodeling, real estate commissions, moving expenses and the like.

Not everybody in Washington is happy with the new credit, however. The National Association of Home Builders pushed hard for a $15,000 credit for all purchases during 2009 -- and got it inserted in the Senate version of the stimulus package.

But House and Senate conferees decided that was too costly in a bill that already had $280 billion in other tax benefits, and they cut it back to the smaller version passed earlier by the House.

Though the improved tax credit is drawing most of the attention, the stimulus package has a handful of other incentives and benefits for home owners. For example, it extends or expands all energy-related tax credits -- for everything from energy efficient heating and airconditioning units, doors, windows and insulation - through the year 2010.

And the bill should produce a lot of additional economic activity aimed at "weatherization" of up to one million houses owned by moderate-income families -- $5 billion worth of new subsidies, according to House Speaker Nancy Pelosi.

Still another big program in the package should create economic ripple effects in neighborhoods where there have been heavy numbers of foreclosures. The bill provides two billion dollars to buy up, renovate and either rent out or resell foreclosed and vacant houses.

The money will go to local governments, but the actual rehab, rental and resales work will flow to people in the private sector.

So if you live or work in an area that's seen a lot of foreclosures, check in with your local housing and planning departments to see how you might fit in.

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