June 23, 2009 Lawmakers want to sweeten deal for first-time homebuyers Play video

(NECN: Peter Howe, Needham, Mass.) - It's been barely a half-year since Congress expanded and sweetened a first-time home-buyer tax credit. But already, many are saying it's time to expand it further to help a housing market still deep in the doldrums.

The current credit is 10 percent of a house price, up to $8,000, available to singles earning under $95,000 annually and couples under $170,000. Under current law, it is set to expire December 1. One of the best sources of information about the credit, restricted to people buying their first primary residence, is the federal tax form you'd fill out if you were seeking to claim the credit.

While it's still taking effect, some members of Congress are now pushing to expand it by another six months. Senator Christopher Dodd (D-Connecticut), chairman of the Senate Banking Committee, and others want to make it a $15,000 tax credit -- and have it available to all home buyers, not just first-timers.

Needham, Mass., Realtor William R. Dermody, a senior vice president of Coldwell Banker Residential Brokerage, is a vice president of the Massachusetts Realtors Association, and a huge fan of the $15,000 plan.

"It adds money into the economy as a whole, not just those purchasing property,'' Dermody says, because "when they buy these properties, then they have to furnish these properties, buy things for them at a Home Depot or a Lowe's or a place

Another criticism Massachusetts Realtors make of the first-time home-buyer credit is that while it helps a lot with spurring sales of lower-end homes, they say it doesn't help much to drive sales of houses in the $500,000-and-up range. Now, in most of the country, $619,000 buys you a palace. But in many Boston suburbs, including Needham, $619,000 is the asking price for a home like one perfectly nice but hardly lavish three- bedroom Cape in Needham near Olin College.

Dermody says of the current tax credit, "Definitely it doesn't reach enough of the market, especially inside the Route 128 belt [near Boston] where the majority of people are.''

Howe: The main argument against expanding the tax credit? It worsens already huge federal budget deficits, because it is a true credit: If you qualify for the full $8,000 and have an $8,000 tax bill, the credit would cut your tax bill to $0, subtracting that much from federal government revenues and widening the deficit. And there's also the question, of all the ways you could use tax breaks to help the economy, is this really the most efficient?

But new proof of just how much help the housing market needs came from a new Harvard Joint Center for Housing Studies report. It says we've hit a 60-year low in housing starts, and what demand there is from buyers now is driven mainly by foreclosure sales, tax breaks, and low interest rates. CLICK HERE to see the full report.

While it will be months before we know just what kind of expansion or extension of the first-time home-buyer tax credit President Barack Obama and Congress are willing to support, what everyone would agree on is this is a market that needs some perking up.