Dodd, Isakson, Urge Expansion of Homebuyer Credit

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Dodd, Isakson, Urge Expansion of Homebuyer Credit

Washington, DC, Oct. 21, 2009--The $8,000 homebuyer tax-credit should be extended and expanded to support housing sales, Senate Banking Committee Chairman Christopher Dodd said.

Dodd, a Connecticut Democrat, and Senator Johnny Isakson, a Georgia Republican and former Realtor, urged colleagues to extend the credit through next June and to expand it to all couples earning $300,000 or less.

The Obama administration’s tax credit for first-time buyers helped stabilize sales this year after the worst housing slump since the Great Depression, Realtors and mortgage bankers said. Lawmakers are struggling to find ways to fuel real estate demand amid rising unemployment and a jump in foreclosures that may add to inventories of unsold homes.

“The work of stabilizing the housing market won’t be done” when the credit expires next month, Dodd said at a hearing of his panel today. “We still need to use every tool at our disposal to fix this problem.”

Purchases of existing homes in August were up 3.4 percent compared with a year earlier, according to the National Association of Realtors. New home sales were up 30 percent from January’s record low, government figures show.

The Mortgage Bankers Association projects that foreclosure rates, already at a record, will climb through late next year, peaking only after the U.S. unemployment rate reaches 10.2 percent in the second quarter.

“It is clear that recovery in the housing market will occur when the number of jobs in the economy begins to expand, thus creating the economic demand needed to absorb some of this excess inventory,” Mortgage Bankers Chief Economist Jay Brinkmann told the panel in written testimony.

The Mortgage Bankers, National Association of Realtors and National Association of Homebuilders all backed the extension.

Alabama Senator Richard Shelby, the committee’s ranking Republican, cautioned lawmakers against continuing policies that artificially inflated home prices and exacerbated the run-up in real estate values that caused the bubble.