WASHINGTON --- Lawmakers are trying to extend and expand an $8,000 federal tax credit for first-time homebuyers, a stimulus-package tax break that many regard as a significant prop for the still-tottering economy.
The latest Senate proposal would drop the requirement that the credit be available only to first-time buyers, broadening the reach of the program but also adding to its cost, estimated by congressional analysts at $16.7 billion.
The backers of that idea, Sens. Johnny Isakson, R-Ga., and Christopher Dodd, D-Conn., chairman of the Senate's banking committee, have suggested that their measure be attached to another pending bill aimed at throwing a lifeline to people hit by the recession, an extension of federal assistance to the millions in danger of exhausting unemployment insurance benefits.
While the White House says there will not be a second stimulus package following the $787 billion economy booster enacted last February, extending the homebuyers' credit and unemployment benefits are among several primary means being pushed by the administration or Congress to help people get through the prolonged economic downturn.
Others include continued subsidies for laid-off workers trying to keep their health insurance and a proposal by President Obama to provide seniors and others with a $250 payment to make up for the lack of a Social Security cost-of-living increase next year.
The stimulus-package credit allows first-time homebuyers to reduce their federal income taxes by 10 percent of the price of a home, up to a maximum of $8,000. The credit, which could cost in the $12 billion-$15 billion range this year, is set to expire Dec. 1.
The Isakson-Dodd proposal would extend the credit to June 30, 2010. It would also remove the first-time homebuyer requirement and raise the eligibility income limit to $150,000, or $300,000 for a couple. That's double the current phase-out limits.
Brookings Institution economist Ted Gayer wrote in a recent report that the tax credit is "very poorly targeted." He calculated that of the 2 million or more people who would make use of the credit if it were extended for a year and expanded to cover all buyers, only about 383,000 would be additional sales motivated by the credit. He estimated that the real cost of the credit would thus be more than $40,000, rather than $8,000, per buyer.
FORECLOSURES UP
WASHINGTON --- The number of U.S. households caught up in the foreclosure crisis rose more than 5 percent from summer to fall as a federal effort to assist struggling borrowers was overwhelmed by a flood of defaults among people who lost their jobs.
The foreclosure crisis affected nearly 938,000 properties in the July-September quarter, compared with about 890,000 in the prior three months, according to a report released Thursday by RealtyTrac Inc. That puts foreclosure-related filings on a pace to hit about 3.5 million this year, up from more than 2.3 million last year.
Unemployment is the main reason homeowners are falling into trouble. While the economy is likely out of recession, the unemployment rate -- now at a 26-year high of 9.8 percent -- isn't expected to peak until the middle of next year.
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