Nov 2009 8

Will a Tax Credit Extension Help the U.S. Market?

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American House by La Citta Vita
American Real Estate Market
by La Citta Vita

In the United States, the GDP recorded 3.5% growth in the third quarter – for the first time in a year. Similarly, the once-ailing housing market has shown big improvements since last winter. Is our southern neighbour really waking up?

Right now, the U.S. real estate market is working with 7.5 months’ supply of inventory. This sounds like quite a lot, but compared to January’s 12.4 months’ supply, it is a great improvement. Eyes of all real estate experts (but also potential buyers) are now on one thing – the first time home-buyers’ tax credit.

The opportunity to receive an $8,000 tax credit (or even cash back, if the recipient’s income tax doesn’t reach this level) has been a strong stimulant for the US real estate market. But as the expiry deadline for this special offer comes closer, market watchers are becoming nervous. What will happen once the tax credit is no longer available?

Lawmakers have already prepared an extension bill, which should push the deadline further to the year 2010. Senate has already cleared the way for the law, which may reach Obama this week or next. Not only is the deadline about to be extended till April 30, the allowable income threshold for couples will also rise to $225,000. And that’s still not the end – a new $6,500 tax credit for move-up homeowners was attached to the bill.

Passing this bill may stoke our southern neighbour’s housing market enough to get through the winter, however, the question remains: how will the US federal budget sustain this hit?

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