Last week, the U.S. House of Representatives passed the Housing and Economic Recovery Act of 2008. The Bill is expected to be signed by the President this week. This is a pretty significant event for the housing market. Here are a few provisions in the bill.
1.) Tax incentive- (Updated on 08/05 :In order to qualify for the first-time home-buyer tax credit of 10% of the home purchase price (up to $7,500), buyers must not have owned property within the last three years and must make their purchase between April 9, 2008 and July 1, 2009. The credit phases out for individuals making more than $75,000 or joint filers making more than $150,000 a year. The credit functions much like an interest free loan from the government. It is not a tax deduction and must be paid back in equal installments over 15 years.)
2.) Increasing limits on Fannie Mae and Freddie Mac-backed loans from $417,000 to $625,000. (varies by area). In Seattle, the estimated limit for FHA and conventional loan will be $522,100.
3.) Creating a line of credit to Fannie Mae and Freddie Mac, enabling them to continue backing existing loans.
On top of that, the bill will also include creating an independent agency to regulate Fannie Mae and Freddie Mac.
This obviously won’t address the oil prices and non-housing macroeconomic challenges but no doubt will provide some relief to the housing market woes. It’s welcome news for distressed owners and first-time home buyers. The last time Congress passed legislation like this was in the 1970’s (subsequently, the housing market saw a significant increase in activity). I think it is about time for us to hear some good news instead of the constant media attention on national foreclosures. Read more here.