Under the housing program, people buying a home for the first time in three years would receive an $8,000 tax credit if they sign a contract by April 30 and close by June 30. Homeowners who are buying a new primary residence would be eligible for a $6,500 tax credit beginning Dec. 1 if they owned their home for five consecutive years in the previous eight.
The timing is more flexible for military families who have been deployed overseas for 90 days or more in 2008 or 2009. They would have until April 30, 2011, to sign a contract.
To qualify, the home must be no more than $800,000. The program also restricts eligibility to individuals who make no more than $125,000 annually and couples who make more no more than $225,000. Anyone who collects the tax credit but sells the home within three years of buying it must return the refund.
The original tax credit, which was set to expire Nov. 30, has been credited with helping the housing market stabilize by coaxing new buyers into the market. But economists worry that the program distorts the market by artificially inflating home prices and are skeptical about whether the amount of additional economic activity is worth the cost. The program is estimated to cost $10.8 billion.
“The housing market is going to have to learn to stand on its own two feet,” MacGuineas said. “This could misdirect resources into the wrong place.”