New Stimulus Law

New Stimulus Law

Thu, 26 February, 2009
Posted by wendy renner

So I thought I should post again what the new stimulus law really says. There seems to be some mixed views and reports floating around out there. This comes directly from NAHB public affairs department. So hopefully this will help clear up some confusion.

New Stimulus Law Includes $8,000 Home Buyer Tax Credit

  • While the new economic stimulus law could have done more to help stimulate housing demand, it does contain several provisions to boost the housing market.
  • At the top of the list is an $8,000 tax credit for first-time home buyers. The tax credit is bigger and better than the one approved last summer. The new tax credit:

- Does not have to be repaid;
- Is fully refundable;
- Will remain in effect until Dec. 1, 2009 so that consumers can utilize it during the critical summer and fall home buying months;
- Allows tax credit home buyers to participate in the mortgage revenue bond program; and      
- Permits state housing finance agencies to help buyers at closing by advancing the credit amount as a loan using tax-exempt bond proceeds.

  • The tax credit will bring fence sitters back into the market, help stabilize home values and slow the rate of foreclosures.
  • It will also save and create tens of thousands of jobs in housing and housing-related industries, generate billions of dollars in wages and salaries and billions more in federal, state and local tax revenue.
  • More information on the first-time home buyer tax credit can be found at www.federalhousingtaxcredit.com.
  • In addition, NAHB has compiled several resources to help builders market the new tax credit. They can be found at www.nahb.org/taxcreditmaterials.

Other Key Provisions

  • Other important components in the American Recovery and Reinvestment Act of 2009 will help small businesses and bolster the housing market. The legislation will:

- Help home borrowers by restoring the higher 2008 FHA, Fannie Mae and Freddie Mac loan limits through the end of this year. The limit will return to $729,750 from the current $625,500 in the highest cost markets. It will also rise in many other areas because the 2008 maximums were based on a more generous formula and, for most areas, higher median prices;
- Temporarily allow exchange of Low-Income Housing Tax Credit allocating authority for tax-exempt grants;
- Increase bonus depreciation and Section 179 small business expensing for business investment in 2009; and
- Expand the net operating loss carry back period from two years to five years for small businesses for losses arising in tax year 2008.

Foreclosure Relief Plan

  • Also of note, President Obama last week unveiled a $75 billion foreclosure relief plan designed to help 7 to 9 million “responsible” home owners remain in their homes with affordable mortgage payments.
  • This is an important first step to address the acute supply problems confronting the housing market.
  • The Administration believes its plan would enable Fannie Mae and Freddie Mac to refinance four million to five million home owners.
  • The plan would create new incentives for lenders to work with borrowers to modify the terms of loans at risk of default or foreclosure.
  • It also contains measures to bolster the financial stability and mortgage support capacity of Fannie Mae and Freddie Mac.

Stimulus Bill and Foreclosure Relief a First Step

  • Keep in mind that the new stimulus law and foreclosure relief plan mark the beginning of the recovery process.
  • The housing sector still faces significant challenges. NAHB will leave no stone unturned until the housing market gets back on track.
  • In the days, weeks and months ahead, NAHB plans to work closely with the Administration and Congress to end the current downward spiral in the nation’s housing market and get the U.S. economy moving again.
  • On the supply side, we will be looking to reduce foreclosures so that millions of Americans can stay in their homes.
  • We will also urge Congress to continue to take action to spur housing demand and to end the credit crunch, particularly as it relates to acquisition, land development and home construction (AD&C) lending.
  • Until we move to resolve the housing crisis, we will not be able to pull the nation out of recession.

Long-Term Outlook Favorable

  • Despite the serious problems we are facing today, it’s also important to keep your eye on the big picture.
  • Home builders are resilient. We’ve weathered bad storms before and we will again.
  • Looking at the market over the long-term, the U.S. is definitely on a growth path.
  • Our population will rise by about 35 million over the next 10 years. All of those people will need someplace to live. Consider these facts:
  • America currently has about 105 million occupied housing units.
  • About 70 million of those are owner-occupied. The other 35 million are rental units.
  • Total equity (value of homes minus any mortgage debt) amounts to $8.5 trillion.
  • 37 percent of all home owners own their home outright, with no mortgage debt.
  • And for those who have mortgages, more than 90 percent are making their payments on time every month.
  • Housing affordability has improved markedly in many metro areas since 2006.
  • Home values will ultimately bottom out and start edging back up.
  • Once we turn the corner on the housing downturn, the longer term housing outlook is promising.