Figure 1 - Home owner smiling Bob is all for extension and expansion.

This post’s title originated from an odd and unintentionally humorous commercial my friend heard on the radio advertising male enhancement drugs. The commercial claimed the advertised product would make you thicker and wider. Unless your parts are shaped like a spatula, this does not make a whole lot of sense.  I was thinking about writing a post on this, but decided that I didn’t want to write about wang pills.  I decided the metaphor was appropriate to apply to the housing market, given that we’re all pretty much boned.

Speaking of dick measuring, representatives in both the House and the Senate have proposed among them five different bills affecting the current $8,000 first-time home buyer tax credit, all trying to take some credit of their own as saviors of the housing market.  I applied the “popularity contest” principle to these because, despite slight variations, they all propose pretty much the same thing.

The common theme among the five bills is extension of the current credit. I can most certainly agree with this being the forefront of any initiative to modify the current credit.  Like others trying to weather an unsure economic climate, I had already made other financial plans and goals when I heard about the credit earlier this year. The prospect of getting $8,000 in return for purchasing a first home probably got many thinking about buying their first home, but it also left them scrambling.

Prospective home buyers have been left having to modify their financial plans, improve their credit, ensure they have a proper down payment, research available homes, familiarize themselves with the home buying process, and obtain financing. The credit’s expiration of November 30, 2009 meant that these first-timers would have to close on their first home within months, having not previously planned on purchasing.  Many surely would benefit from the tax credit as it exists, but the question remains: will the credit get extended, or even expanded, so more people can capitalize on the opportunity?

Figure 2 - You were expecting Scrooge McDuck perhaps?

For the financially savvy, this may not seem like a large undertaking for an individual, but we’re in a financial crisis caused mostly because, well, there are a lot of people out there who think a five year CD is an album released in 2004. Regardless of the difficulties any person may have in getting their financial ducks in a row (Figure 2), the opportunity is just too good to pass up.  Combine the tax credit with an abundance of available homes, relatively low mortgage rates, and falling home prices, and the market is prime for a first-time buyer.

I haven’t met anyone in favor of all of the spending that’s going on in the government right now, but if it’s going to benefit you, it’s hard to pass up on principle.  I’ve created a table below that organizes the five outstanding bills so you don’t have to read through boring detailed legislation. If you do want to read the bills and view their respective statuses, I’ve included a link to each in the “Bill” column. For those not hip to the Legislative Branch of the United States government, the “S.” and “H.R.” abbreviations on each bill designate whether they were introduced in the Senate or the House of Representatives.

¹Senator Isakson sponsored the initial first-time home buyer tax credit in the Stimulus Bill passed in early 2009.
²Retroactive for all purchases made after 4/8/2008.  Taxpayer may also claim purchase as if it were made December 31 of the previous year.

All of these bills are being shown as in committee at the time of this posting, and whether any of them get passed in any modified or unaltered form remains to be seen. I hope H.R. 2801 doesn’t pass though.  Representative Howard Coble named it the “Home Ownership Moves the Economy” Act, or “HOME” for short.  The world has enough acronyms, Howard.

Something to consider is how the pending status of these bills could affect the housing market.  If a prospective home buyer is aware of these bills, they may hold off in purchasing a home until these bills are either signed into law or rejected.  A potential roadblock to passage of any of these bills could be the rising pressure from the White House in getting health care reform at the forefront of the daily work of congress. The President’s Council of Economic Advisers released their executive summary on The Economic Case For Health Care Reform in June, and this issue will only gain more steam.

Given the fact that the common theme of all five bills is an extension, I think that one of these bills, in some form, will get signed into law this year. Which one and when, I don’t know, but with the August recess of congress coming up, I don’t expect it to be soon.  A legislator is the only job I know that they actually bring back recess as an adult.  I bet Joe “flip flop” Lieberman (I) gets picked last in kickball.

If the home buyer tax credit is important to you, write your representatives.