The first-time home buyer tax credit originally slated to expire on Nov. 30, was extended and expanded earlier this month by Congress and the President., according to the National Association of Home Builders' "Eye on the Economy" newsletter.
The tax credits have been cited as a significant reason for the recent improvement in home sales. With the program expanded to include new eligible buyers and extended five months, the housing market appears to be positioned to continue its recent improvement well into next year.
The first-time buyer tax credit will be available for buyers who sign a contract by April 30, 2010, and settle on the house no later than June 30, the newsletter reports.
In addition, move-up/repeat home buyers (existing home owners) who have lived in their primary residence for five of the last eight years will now be eligible for a tax credit of up to $6,500.
The tax credits are expected to boost new and existing home sales by180,000, including sales of about 40,000 new homes and 26,000 sales vacant homes, says the NAHB newsletter. These sales are also expected to generate more than 200,000 new jobs, primarily in residential construction and related fields but also through the jobs created by the ripple effect of the new construction jobs and the additional spending power of the tax credit recipients.
Other Segments of Economy Improving, Too
According to recent data from the Commerce Department Bureau of Economic Analysis real U.S. gross domestic product (GDP) rose by 3.5% (on annual basis) in the third quarter, following four consecutive quarters of decline. Industrial production also improved from July through September.
The increases in the third quarter came mainly from, "positive contributions from personal consumption expenditures, exports, private inventory investment , federal government spending and residential fixed investment," the Bureau states.
Jobs Have Yet to Turn the Corner
However, jobs continue to decline even in the face of a strengthening economy. Some 190,000 jobs were lost in October and the unemployment rate rose to 10.2% in October, up from 9.8% in September, according to a Bureau of Labor Statistics news release.