Transcripts

Home Sales Build on First Time Buyer Tax Credit

SUSIE GHARIB: House hunters turned into home buyers in September. A new report today showed sales of existing homes surged to their highest level in more than two years, up almost 9.5 percent. Now, most of those sales were from first-time home buyers. They rushed to take advantage of the $8,000 government tax credit that expires at the end of November. As Stephanie Dhue reports, there's debate about the success of the tax credit and whether it should be extended.

STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: On the positive side for the home buyers' credit, National Association of Realtors economist Lawrence Yun says it's put a dent in the glut of unsold homes.

LAWRENCE YUN, CHIEF ECONOMIST, NATIONAL ASSOCIATION OF REALTORS: As a result of the buyer surge, we are seeing a significant decline in inventory. And as a result, the prices are beginning to stabilize. It's still lower than one year ago, but the declines are less severe now than before.

DHUE: On the negative side, the program is rife with fraud. The IRS says people who haven't bought homes are applying and others are using their children's names to avoid income limits. Even without those problems, housing policy expert Andrew Jakobavics says the credit is costly.

ANDREW JAKABOVICS, ASSOCIATE DIRECTOR, HOUSING & ECONOMICS, CENTER FOR AMERICAN PROGRESS: Four out of these five people who are claiming the credit were going to go out and buy a house anyway, so the actual benefit that we get from that additional one out of five people is really not particularly well targeted. It's very costly to get that additional one person into the marketplace.

DHUE: The realtors estimate an additional 400,000 homes were sold this year because of the incentive. But economist Richard Dekaser says the tax credit is only part of the story.

RICHARD DEKASER, ECONOMIST, WOODLEY PARK RESEARCH: We're now looking at the most affordable housing market in 40 years. You'd have to go back to 1968 to see the share of household wallet being claimed by a new home purchase. So I think there are fundamental factors, as well as tax related incentives going on.

DHUE: Also going on two big issues: whether the tax credit will be extended, despite abuse and high costs; and whether not extending it will pull the rug out from under the housing recovery. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.