Homebuyer tax credit extended and expanded

capitolU.S. real estate received a big boost from Congress earlier this month when President Obama signed into law a five-month extension of the first-time homebuyer tax credit and a new tax credit benefiting existing homebuyers.

The first-time credit, part of the American Recovery and Reinvestment Act of 2009, was set to expire Nov. 30. Both credits will be available for qualified buyers through April 30. “Congress did the right thing by extending and expanding these tax credits,” said Prudential Real Estate and Relocation Services President Earl Lee. “The first-time homebuyer credit played a significant role in the U.S. housing market’s recovery in 2009, and both will help the market in the new year.”

According to the National Association of REALTORS, nearly half of all home sales are now being made by first-time purchasers. In fact, 47 percent of all Americans who purchased homes this year had not owned one during the previous three years, said NAR, up from 36 percent in 2006. NAR forecasts that existing home sales will rise 2 percent this year to just over 5 million. NAR predicts a 13.6 percent gain in 2010 to 5.69 million homes sold.

The first-time homebuyer tax credit equates to as much as $8,000, or 10 percent of a principal residence’s purchase price and is available to those who have not owned a principal residence in the past three years. Existing homeowners who have lived in their current home for at least five consecutive years of the previous eight and who are purchasing a home to be their principal residence may be eligible for up to a $6,500 tax credit.

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