Will a Tax Credit Extension Help the US Housing Market?

In the United States, the GDP recorded 3.5% growth in the third quarter – for the first time in twelve months. Since the end of last year the property market is also showing massive improvements.

Are our counterparts starting to come out of the recession? There is a surplus of 7 months worth of stock on the US property market at this moment in time. There has been great inroads into the excess stock on realtors book's considering this figure was just about double at the start of the year. Eyes of many real estate agents (but also possible buyers) are now on one thing – the first time home-buyers’ tax credit.

With $8,000 in tax credits, or even cash back in some instances, these available tax credits have gone a long way in helping boost the housing market. But as the expiry deadline for this special offer comes nearer, market watchers are becoming nervous. When the tax credits are no longer available what is going to happen to the housing market?

All is not lost as an extension bill for the tax credits is being written which will prolong the deadline for a further year until 2010. Senate has now cleared the path for the law, which may make it to Obama this week or next. With a new cut off date of April 30, and an rise to $225,000 on the couples income threshold, this is a very enticing bill. And that’s not all – a new $6,500 tax credit for move-up homeowners was attached to the bill.

Passing this bill may stoke our southern neighbour’s property market enough to get through the winter, but, the question remains: how will the US federal budget sustain this hit?

Image by Crazyemt.