Homebuyers' tax credit may be expanded

Federal tax credits meant to boost flagging home sales didn't buoy the local real estate market, but some local agents saw bright spots.

The tax credit provides up to $8,000 for first-time homebuyers.

The federal credit is set to expire at the end of November, but senators agreed Wednesday to extend the tax credit for first-time homebuyers and offer a reduced credit of up to $6,500 to some repeat buyers who have owned their current homes for at least five years, said Regan Lachapelle, a spokeswoman for Senate Majority Leader Harry Reid, D-Nev.

The Commerce Department said Wednesday that new home sales fell 3.6 percent in September, and some industry representatives blamed uncertainty about the tax credit.

Month-over-month comparisons of home sales in the Shoals shrank consistently in 2009 compared with 2008, according to the Alabama Center for Real Estate.

From January through September, realtors sold 969 homes in Lauderdale, Colbert and Franklin counties. That is a 20 percent decline from the 1,215 homes sold during the same nine months in 2008.

Tax credits would be available to home buyers who sign sales agreements by the end of April. They would have until the end of June to close on their new homes, according to a summary of the proposed legislation.

The credit included buyers who had not owned a home within the past three years. Buyers are not required to pay back the credit if they don't sell the home within three years.

"I wish there was a way to measure the number of transactions due to first-time buyers," said Mike Randall, associate broker at Coldwell Banker Pinnacle Properties and president-elect for the Shoals Real Estate Association.

"We've definitely sold homes this year - me, personally - to first-time home buyers," Randall said.

Year-to-year comparisons are nearly impossible, however. The association does not collect data on buyer profiles and in 2008, realtors weren't focused on first-time buyers.

"Now, the first thing you ask them is: Are you a first-time homebuyer?" Randall said.

Congress extended its similar Cash for Clunkers program that gave $4,500 incentives to boost auto sales.

"If you're going to buy a home and close by Nov. 30, you really need to be under contract now," Randall said.

One problem with the program: "Not enough people know about it," Randall said. "I don't think everybody knows the opportunities within that credit."

Analysts argued that the tax credit helped boost the real estate market statewide.

Because of the tax incentive, statewide sales in the fourth quarter could post a small gain for the first time since July 2007, according to the Alabama Center for Real Estate.

The center publishes The Alabama Home Sales Report each month. The September issue noted the tax credit lifted the first-time buyer segment by approximately 25 percent.

Without the tax credit, an estimated 3,000 transactions would not have occurred in Alabama in 2009, the report noted.

One potential benefactor of the tax credit is Charlie Fowler, founder, owner and broker of CRC Realty, who said he had record months in August, September and October.

Among those who benefited from the federal tax credit: His son, who closed in July and got the full $8,000 plus $100 in interest. His administrative assistant got a home in Bellemeade and a niece bought a home in Heatherhurst.

Fowler said the tax credit started to have a positive effect on his business in June.

"June sent a signal that things are moving in a positive type way," Fowler said.

Of the proposals floating through Congress, Fowler said he prefers a tax credit extension to March that then gets phased out $2,000 each quarter.

"We do need it during the spring peak season, which is through March and July," he said.

He's not in favor, however, of the proposed $6,500 for repeat buyers who have owned their homes for at least five years.

"It will stimulate home sales ... but as a citizen and taxpayer, I'm not sure I'm in favor of that," Fowler said.

Trevor Stokes can be reached at 740-5728 or trevor.stokes@TimesDaily.com.

The Associated Press contributed to this report.