HUD Secretary Shaun Donovan created turmoil in the real estate industry when he said on CNN Sunday that a restoration of the homebuyer tax credit is “not off the table” and that it is “too soon to say” whether the administration’s credit tax credit, which expired April 30, will be revived.
Two Florida candidates for the Senate, appearing on the same show, immediately voiced their support for a new credit.
Donovan’s remarks set off a fierce debate within the real estate industry. Despite the record-setting 27 percent fall in July home sales, the idea of bringing back the credit is surprisingly controversial among real estate professionals. Opinion clearly has changed from the near-unanimous support the credit enjoyed when it was renewed and expanded in February.
“I think this will create a Civil War,” said Realtor Dan Spera of York, Penn. “They would almost have to make this retroactive to those that missed it over the past few months or it is going to be nasty out there.”
“I’ll go out on a limb and say there are many agents salivating at the thought of a revived tax credit, and I’d be shocked if the National Association of Realtors didn’t lobby, hard, for it,” said Jay Thonpson, author of the influential Phoenix Real Estate Guy blog. “Personally, I have yet to be convinced the home buyer tax credit did much to truly help a housing recovery. And I am completely convinced that buying a home just to score an $8,000 tax credit is a bad idea. A really bad idea.”
Ilyce Glink, author of the nationally syndicated Think Glink column, echoed the despair many real estate professionals feel as sales enter free fall.
“What does the U.S. housing market look like without all the life support provided by the federal government?” she wrote in a recent CBS Moneywatch column, A New Home Buyer Tax Credit? HUD Not Ruling It Out . “A little too much like a corpse.”
Talk of another credit is causing sales to contract even more.
“In meetings and discussions op sales professionals and brokerage leadership over the past two weeks I have heard more than once that there is a sense that some of the decline in sales is due to buyers waiting to see whether there will be additional tax credits or stimulus coming from the Federal government. And, as of this writing, while there is no evidence that such financial stimulus measures are in the offing, it is also likely that at least some buyers may be waiting for just that,” wrote Steve Murray in his influential Real Trends newsletter.
“It may be time for policy makers to declare whether any new tax credits or other targeted housing stimulus is in the offing and if not declare that as well. Further while no one wants rates to increase in the near term it could well be that the threat of increasing rates in the future may stimulate some housing sales,” Murray said.
Meanwhile HUD tried to limit the boss’s damage. “No news here,” a HUD spokesperson told CNBC yesterday. “There are no discussions underway to revive the credit.”
But if August pending sales, which are due out Thursday, look anything like July’s disastrous existing home sales, the grass roots pressure for a political solution will surely escalate. With just two months to go before a midterm congressional election, the future of the homebuyer tax credit may be decided in campaign speeches and voting booths, not the concrete-walled hallways of HUD.