So far this year the housing market has been struggling to maintain some sort of recovery which followed a steep decline that helped push the nation's overall economy into the worst recession since the 1930s.
For the last couple of months both real estate agents and homebuilders have been lobbying Congress to extend the new home-buyers tax credit and so far the effort appears to be paying off by gaining momentum, however the Obama administration has been vague about its position regarding the tax credit.
As someone who spent most of his career as a real estate agent, Sen. Johnny Isakson, (R-Ga), has said "this market is going to die a sudden death" without the extension of the federal tax credit.
Christopher Dodd, D-Conn., chairman of the Senate's banking committee and Senator Isakson both want to extend the tax credit until June 30, 2010 while at the same time they also want to drop the requirement that the credit be available only to first-time buyers. The estimated cost for this change is $16.7 billion.
They further suggested that their new measure should be attached to an extension of the federal assistance program since millions of unemployed people are dangerously close to exhausting their unemployment insurance benefits.
At a congressional hearing today, Housing Secretary Shaun Donovan said that supporting the unstable housing market "can be very expensive, especially at a time of significant budget deficits."
After studying data on tax filings from the Internal Revenue Service, the Obama administration should, in the coming weeks, make their recommendation whether or not to extend the tax credit. It's felt by some analysts that there will be some negative effects if the tax credit is allowed to expire. Housing Secretary Shaun Donovan said, "I do not believe that a catastrophic decline would be the result."
Some lawmakers and analysts are skeptical about extending the credit while arguing the fact that they feel that most homebuyers who would receive the tax credit have already decided to buy a home anyway.
Also, used as a gauge of future construction, applications for home building permits dropped last month by the largest amount in five months and some feel that this is a discouraging sign for the housing industry.
The new construction permit decline, in part, reflects the uncertainty that Congress will extend a tax credit for first-time homebuyers.
The Commerce Department also reported today that construction of new homes and apartments rose 0.5 percent in September to a seasonally adjusted annual rate of 590,000 units which was less than the 610,000 units that economists expected.
On the flip side, applications for building permits fell 1.2 percent last month which was the biggest decline since a 2.5 percent drop this past April. This decline solidifies the worries that the sluggish housing market revival may be derailed as unemployment continues to rise and tighter lending standards continue by the banks, as well as the expiration of the government's $8,000 tax credit for first-time homebuyers which will end on November 30th.
Overall, the housing industry feels that expanding and extending the tax credit for another year would produce close to 350,000 new jobs and almost $12 billion in additional tax revenues.