Transcripts

The First Time Home Buyer Tax Credit May Need An Extension

SUSIE GHARIB: The clock is ticking for first-time homebuyers who want to take advantage of the government's $8,000 tax credit. To get it, your mortgage must close by November 30. But since deals are taking months to finalize these days, making that deadline is dicey. As Stephanie Dhue reports, that's why the industry is gearing up to get the measure extended.

STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Realtors and home builders are using the first time home buyer tax credit to drum up sales. But time is running out. Nearly one and a half million buyers have already taken advantage of Uncle Sam's offer. The National Association of Realtors says 350,000 of those sales were made primarily because of the credit. NAR economist Paul Bishop says it would be risky not to extend it.

PAUL BISHOP, ECONOMIST, NATIONAL ASSOCIATION OF REALTORS: In the past, the economy has not recovered unless the real estate market has also recovered and so to a large degree, it makes sense to make sure that the real estate market is on stable footing. Otherwise the rest of the economy probably is not going to be or it's going to be a very weak recovery.

DHUE: But the tax credit is costly. The government will spend $15 billion for those 350,000 additional home sales. Divide that and it's nearly $43,000 per buyer. Realtors argue each home sale generates $60,000 in economic activity. But economist Dean Baker says the money could be better spent.

DEAN BAKER, CO-DIRECTOR, CTR. FOR ECONOMIC & POLICY RESEARCH: The government spends $15 billion on anything, it provides a boost for the economy and I would say that almost anything else we had spent the money on, we could have spent it on giving money to state and local governments so they don't have to make cutbacks. We could have spent it on unemployment compensation. We could have spent it on any number of areas that would have had a much more stimulative impact.

DHUE: Since many people moved up their purchase of a home to take advantage of the credit, Baker says extending it won't have much impact. Policy analyst Andy Laperriere says despite concerns about the credit's cost and effectiveness, it's still likely to be extended.

ANDY LAPERRIERE, MANAGING DIRECTOR, ISI GROUP: Ultimately this doesn't create a sustainable recovery, but some, enough members of Congress I think believe that this is important enough for now to stabilize housing that they're going to do it, especially with the pressure from the realtors and other special interests as well.

DHUE: Special interests are also pushing to extend the tax credit to all home buyers, but doing that would be even more expensive and lawmakers are already having trouble figuring out how to pay for it. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.