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Tax Credit Extension Likely

July 1, 2010

The House has passed a bill to extend the home buyer tax credit by an additional three months.For home purchases where a binding sales contract was signed by April 30, 2010, qualified buyers have until June 30, 2010 to complete the purchase, but the extension would allow the credit if the closing takes place by September 30, 2010. The bill goes to the Senate, where It could vote on the bill as early as tomorrow.

Only homebuyers who signed purchase agreements by April 30 will benefit from the extension. The National Association of Realtors estimates that this accounts for 180,000 home buyers currently stuck in closing limbo.

With a national housing inventory of more than 4 million homes, the extension gives little incentive to home buyers entering the market today. After the April deadline, new-home sales dropped nearly 33 percent to a record low of 300,000 in May, the Commerce Department reported. Since its creation in 2009, more than 2.6 million taxpayers claimed the tax credit through April for a total of $18.7 billion, according to the Internal Revenue Service.

Even without the tax credit, though, now is as good a time to buy a home, thanks to the large inventory currently on the market and near-record-low mortgage rates. According to the Tax Policy Center, roughly 85 percent of consumers who benefited from the tax credit would have bought a home anyway.

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